Should Investors Continue Riding With Uber? The Street Weighs In

Ride-hailing and delivery company Uber Technologies Inc UBER reported mixed second-quarter results Thursday that prompted Street analysts to debate whether the company is overly exposed to COVID-19 headwinds.

The Uber Analysts

Raymond James analyst Aaron Kessler maintains a Market Perform rating on Uber's stock.

Needham analyst Brad Erickson maintains at Buy, unchanged $42 price target.

Wedbush analyst Ygal Arounian maintains at Outperform, price target lowered from $47 to $41.

Morgan Stanley analyst Brian Nowak maintains at Overweight, price target lifted from $44 to $46.

KeyBanc analyst Edward Yruma maintains at Overweight, unchanged $40 price target.

DA Davidson analyst Tom White maintains at Buy, unchanged $39 price target.

Takeaways On Uber's Q2 From Raymond James

Uber reported revenue of $2.24 billion in the second quarter — down 29% year-over-year — versus the Street's estimate of $2.1 billion, Kessler said in a note. Adjusted EBITDA of negative $837 million was roughly in-line with the Street's estimate of negative $853 million, the analyst said. 

Mobility gross bookings were down 73% year-over-year, while U.S. gross bookings in major cities were down between 50% to 85%, he said.

The company did see some markets fully recover, if not exceed their pre-coronavirus highs, including Hong Kong and New Zealand, Kessler said. 

Delivery order volume rose 80% in the second quarter, while key markets like New York City were up 150%, the analyst said. Overall new customer acquisition, Eaters, orders per Eaters and retention rates were all strong, he said. 

The mobility take rate improved to 26% versus 22.8% in the first quarter due to the rationalization of incentive spends, according to RayJay. 

Needham On What Uber Bulls, Bears Liked

Uber bulls are likely to point out the company's "exemplary" execution during this "brutal operating period," Erickson said in a note. Bulls will also point out that mobility bookings were down 73% year-over-year, but the unit still recorded an EBITDA profit, the analyst said. 

Eats grew bookings by 122%, as the unit likely won a "significant" market share in the U.S. and other markets, he said. 

On the other hand, bears are likely to point out that Uber's business remains heavily impacted from the pandemic with no end in sight, Erickson said. 

Wedbush Says Uber Eats A 'Key Asset'

Uber Eats is a "key asset" for Uber after gross bookings doubled year-over-year, and could be worth $10 to $12 per share, Arounian said in a note. The business unit saw continued momentum as third-party food delivery trends accelerated during the pandemic, he said. 

While the ultra-competitive environment will result in continued discounting and offers, Uber showed an improving take rate, and EBITDA losses moderated as a percentage of revenue, the analyst said. 

The recent acquisitions of Postmates and Cornership imply a push into grocery and other goods, and this should drive better leverage across the business, in Wedbush's view. 

"Dara & Co. are maintaining its forecast for profitability by the end of 2021 which remains a linchpin for investors and should maintain a floor in the stock while Uber navigates this very difficult backdrop," Arounian said. 

Morgan Stanley's 4 Uber Takeaways

Uber's Thursday report includes four new takeaways, Nowak said in a note:

• The pace of rides recovery was better than expected and remains dependent on riders' willingness to commute.
• A $1 billion cost-cutting initiative showed immediate results.
• Eats bookings continued to accelerate in July at up 134% year-over-year.
• New investments in grocery/retail delivery and other units could generate growth into 2021 and beyond.

KeyBanc Says Uber's Long-Term View 'Highly Favorable'

Exiting Uber's Thursday report, it is evident the company's outlook "remains highly favorable," as recent tailwinds are likely permanent, Yruma said in a note. Uber was able to take full advantage of stay-at-home orders, and significant market share gains were seen in major cities like New York City, the analyst said. 

"We think food delivery trends will remain strong for the foreseeable future and a higher proportion of delivery is likely even in a post-COVID-19 environment."

DA Davidson On Uber's Guidance, Outlook

Uber offered some commentary on its third-quarter and fourth-quarter outlook, White said in a note.

The mobility segment ANR take rate was guided at 22% to 24% in the third quarter as the company "re-leans" back into incentive spending, the analyst said. 

The delivery unit's third-quarter adjusted EBITDA loss should remain consistent with what was seen in the second quarter, but adjusted EBITDA margins should continue to improve in the fourth quarter, he said. 

UBER Price Action: Uber shares were down 5.82% at $32.70 at last check Friday. 

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Photo courtesy of Uber.