Uber’s (UBER) business had mixed pandemic results. Despite its food delivery operation generating some serious excitement during the times of lockdown, the company was unable to preserve that momentum. Due to this, it incurred losses and lost much of its valuation.
The company has found it difficult to keep up with investors’ expectations. Yet, the market is still bullish on this stock’s performance at this moment, considering its solid prospects and the financial performance in the fourth quarter of 2021.
Management guidance might have not been the best but we’re bullish on the stock.
Uber stock might be lagging behind the S&P 500 due to the pandemic driven headwinds in its ride-sharing business, inflation concerns on its costs, and other reasons. However, the company has a lot going on at this moment which can have a significant positive impact on its operations in the coming days.
For one, it is testing a newer version of its driver-earnings algorithm in 24 American cities that would let the drivers see both pay and destinations before accepting a trip so as to provide them with better incentives.
Key Financial Metrics
Uber came out with Q4 2021 results in February. Q4 revenue grew by 83% year-over-year to $5.8 billion, and net income came to $892 million, including a $1.4 billion net benefit (pre-tax) relating to its equity investments.
The company was able to reverse its operating loss of $454 million at the adjusted EBITDA level recorded in the fourth quarter of 2020 by generating a positive adjusted EBITDA of $86 million. This adjusted EBITDA level was also 15% higher than what the company had predicted back in November 2021 and notably, this was the first time the company’s Delivery segment had generated a positive EBITDA.
This income growth was driven by the 51% year-over-year increase in the company’s gross bookings, including a 67% improvement in Mobility segment bookings and a 34% improvement in the Delivery segment.
Uber has a Strong Buy rating consensus on TipRanks, due to 25 Buys and one Sell assigned over the past three months. The average Uber price target of $60.48 suggests 64.8% upside potential.
Multiple Issues
Uber is going through some serious issues. Firstly, it is continuing to face legal challenges relating to its gig economy business model.
Last year, the UK’s Supreme Court had ordered worker rights to its drivers by providing them means like minimum wage pay. Similar issues are going on in New York and California, as well.
The impact of high inflation and rising interest rates are taking a toll on the company’s global operations. Uber also had to stop operating in Ukraine, and also had to accelerate the rate of divestment in Yandex by removing three of its executives on the board of its joint venture with the Russian taxi operator.
Huge Market Opportunity
Uber still has a huge market to address. The global online food delivery market was valued at $106.1 billion in 2021 and might reach $223.7 billion by 2027.
Uber holds only a 24% share in this growing market. Besides, the freight market is projected to reach $2.7 trillion by 2026, indicating a huge growth opportunity for the company’s third segment as well.
Uber’s shares look quite attractive at this moment as it has some solid prospects ahead of it. After two difficult years, it seems good days are here for the company.
Though the legal challenges relating to its business model might look concerning, one must remember no stock comes without any risk.
Download the TipRanks mobile app now
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
Read full Disclaimer & Disclosure
