Why The DiDi IPO Is Good News For Uber: BofA

Following Chinese ride-hailing giant DiDi Global Inc.'s DIDI Wall Street debut, an analyst at BofA Securities reiterated a bullish take on U.S. peer Uber Technologies, Inc. UBER.

The Uber Analyst: Justin Post reiterated a Buy rating and $71 price target for Uber shares.

The Uber Thesis: Uber's investment in Didi, initially made in 2016 and subsequently trimmed, now has an asset value of $5.9 billion, which represents 12% equity ownership in the Chinese company, Post said in a note.

Based on data from Bloomberg, Didi's closing price of $16.40 Thursday gave the company a $79-billion market capitalization, the analyst said. Uber's 12% equity stake in Did translates to $9.4 billion in equity value, he said. 

Uber's equity value in Didi is about $3.5 billion higher than the $5.9 billion in asset value for Didi included on Uber's most recent balance sheet, Post said.

"Based on 1.9bn shares outstanding for Uber, we estimate that translates to an incremental ~$2 per share in equity value for Uber."

Related Link: If You Invested $1,000 In Uber Stock One Year Ago, Here's How Much You'd Have Now

Uber stock is down 1% year-to-date versus increases of 26% and 27%, respectively, for Lyft, Inc. LYFT and DoorDash, Inc. DASH, Post said. 

When applying the enterprise value/revenue valuation of DoorDash and Lyft to BofA's Uber estimates for Delivery and Mobility revenues, respectively, and adding in updated asset value for Didi and adjusting for net debt, Uber's equity value per share is well above the firm's $71 price target, the analyst said.

The magnitude of the discount to a sum-of-the-parts valuation using comp multiples is an opportunity relative to Uber stock appreciation, according to BofA. 

UBER Price Action: At last check Friday, Uber shares were up 1.27% at $51.23. 

Related Link: Uber Analysts Bullish After Q1 Report: 'Mobility's Recovery Continues To Progress'

Photo: courtesy of Uber.