Uber Can Find 'Workable Solution' In California, Analyst Says In Upgrade

While low ride volumes and increased regulations will remain headwinds in the near-term, Uber Technologies Inc UBER is well-positioned to tackle these challenges and capitalize on the structural trends toward ride-sharing and delivery, according to Daiwa Capital Markets.

The Uber Technologies Analyst: Jairam Nathan upgraded Uber Technologies from Neutral to Outperform with an unchanged $34 price target. 

The Uber Technologies Takeaways: The company has a global and diversified portfolio, a strong market position and is agile enough to adapt its business model to changing scenarios, Nathan said in the Friday upgrade note. (See his track record here.)

Uber is facing regulatory hurdles in California, a state that accounts for around 9% of gross bookings, including rides and delivery, the analyst said.

“Given Uber’s experience in operating under different business models globally and a flexible cost structure, we think the company will be able to arrive at a workable solution longer-term.”

Although the rebound in ride-sharing has been slow and uneven across regions globally, there seems to be no structural shift away from the service, he said. 

The pandemic has “accelerated food delivery penetration by at least a year,” Nathan said.

While industry participants are spending heavily on promotions to grab a larger share of a growing market, the analyst said he expects the focus to shift to profitability as growth moderates.

UBER Price Action: Shares of Uber Technologies were trading down 0.3% at $31.32 at last check Friday. 

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Photo courtesy of Uber.