Uber Analyst Sees Rebound In High Margin Airport Travel In Second Half, Gains From Food Delivery Business

Mizuho analyst James Lee reiterated Buy on Uber Technologies, Inc UBER with a $46 price target.
Based on airport and airline tracking in the U.S. and Europe, the analyst anticipates a rebound in the 2H22, which is positive for airport use cases, a high-margin business.
Furthermore, use cases like commuting back to FY19 levels and expected room for improvement in the social gathering still lag vs. FY19.
Considering seasonality, consensus Gross Booking Q/Q growth for 4Q22 appears conservative as the seasonal lift is below historical patterns, especially with UBER gaining market share in recent quarters due to rational competition.
Heading into 1Q23, the analyst believes that comps are more accessible as the same quarter last year experienced two months of rising omicron infections.
Food delivery market shares have been relatively stable in the U.S. and Europe, consistent with management's strategy of optimizing EBITDA while maintaining share.
Holistically, the food delivery business competition has become rational, so the margin profile has become more attractive.
As a result, Uber Eats has consistently outperformed its target of 5% incremental EBITDA margins on GB over the past few quarters.
The slowing economy has positively impacted driver supply and customer acquisitions, two major cost items for ridesharing.
As a result, driver incentives came down meaningfully compared to 2Q22 but still elevated compared to FY19, indicating more room to go down in FY23.
At the same time, customer acquisition costs remained subdued due to competitors pulling back on consumer incentives.
With that in mind, the analyst expects the take rate to stay upward.
Price Action: UBER shares traded higher by 3.81% at $30.76 on the last check Tuesday.

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