Uber (UBER) has proposed slashing pay for its drivers in New York City. According to a report published today by Bloomberg, the ride-sharing company is seeking to lower the cost of rides for NYC customers. However, this would come at the expense of reducing pay for drivers. And as UBER stock is volatile today, it is clear that the market is not reacting well to this idea.
This policy has not been implemented yet and has only been outlined in a letter that it plans to submit to the Taxi and Limousine Commission. However, this initiative could pose significant consequences for UBER stock should it receive the green light from regulators.
What’s Happening with Uber Stock?
Trading has been volatile today for Uber. As of this writing, UBER stock is up on the day, although its current trajectory suggests that this direction could shift at any time. Uber is still struggling to make up the ground it has lost since shares plunged on October 31. It is currently down 7% for the past five days.
In its letter, Uber cites rising gasoline prices as the reason why this drive pay reduction is necessary. As Bloomberg reports, “The company would like the city’s Taxi and Limousine Commission, which sets minimum driver pay, to reduce the per-mile rate in its driver pay formula by 6.1% to $1.277 from the current $1.360.”
New York City is one of Uber’s largest markets and lowering ride costs there could certainly lead to a spike in rides booked. But if drivers opt to quit as a result of this pay reduction, it could negatively impact UBER stock, as the company could struggle to meet the rising demand. This comes after Uber reported record profitability, surpassing Q3 earnings estimates.
Is Uber Stock a Buy, Sell, or Hold?
Turning to Wall Street, analysts have a Strong Buy consensus rating on UBER stock based on 32 Buys, two Holds, and zero Sells assigned in the past three months, as indicated by the graphic below. After a 52% rally in its share price over the past year, the average UBER price target of $91.86 per share implies 25% upside potential.
See more UBER stock analyst ratings
News of Uber’s driver pay reduction plans does not seem to be impacting analyst sentiment toward it. Evercore ISI analyst Mark Mahaney maintained both a Buy rating and $90 price target on UBER stock today, implying upside potential of 62%.
