Uber Technologies, Inc. (UBER), famous for its ride-hailing services, develops and operates proprietary technology applications. The company operates in two segments: Core Platform and Other Bets. Its food delivery services UberEats and UberFreight have become widely popular since the onset of the pandemic.

The company had an IPO in May of 2019, and it’s stock price fell for the remainder of the year.  In March of 2020, when the markets tanked due to the onset of the coronavirus, shares of UBER fell to an all-time low of $13.71.  However, the company has been on a growing path since then, and has gained about 19% year-to-date. This impressive recovery and potential upside based on a number of factors have helped the stock earn a “Buy” rating in our proprietary POWR Ratings system.

Expanding into food delivery and freight services, the company has managed to stay afloat and is set on a growth path despite the controversy regarding preserving the status of gig-economy drivers as independent contractors rather than employees.

Here is how our POWR Ratings system evaluates UBER:

Trade Grade: A

UBER is currently trading above its 200-day moving averages of $32.34, indicating an uptrend. Moreover, UBER has gained 27% over the past six months, reflecting solid short-term bullishness.

UBER’s delivery gross booking increased 113% year-over-year in the second quarter ended June 2020, while delivery revenue rose 103% from its year-ago values. Its delivery adjusted net revenues increased 162% from the same period last year. UBER’s delivery adjusted EBITDA, though negative, increased $54 million from the prior year quarter, despite the pandemic driven disruption in business operations.

Uber Freight, the logistics arm of the company, raised $500 million in funding from Greenbriar Equity Group, L.P. (Greenbriar) to advance the logistics. UBER recently raised $500 million through issuance of senior notes, which should help finance its expansion projects and general corporate requirements.

Buy & Hold Grade: C

In terms of proximity to its 52-week high, which is a key factor that our Buy & Hold Grade takes into account, UBER is well positioned. The stock is currently trading just 17.7% below its 52-week high of $41.86, which it hit on February 12th.

While UBER went public only last year, it has a promising outlook with operations in over 69 countries. The company’s revenue increased 12.2% year-over-year. However, UBER’s IPO failure held the company back from growing for the better part of 2019 and beginning of 2020. 

Peer Grade: B

Lyft, Inc. (LYFT) is another popular stock in the ride-sharing industry. While UBER gained 19% year-to-date, LYFT declined 38% over this period.

Industry Rank: B

With the world going digital and people being wary of going out, the travel industry has been hard hit. The ride-sharing industry was no exception. However, with the economy reviving, the demand for the ride-sharing industry could reach pre-COVID levels soon and be up and running in no time.

Moreover, as people are apprehensive about crowded public transports and subways which do not follow the safety precautions such as six-feet distancing, people ride hailing companies are expected to become the first choice for commuting by 2021.

Overall POWR Rating: B (Buy)

UBER is rated “Buy” due to its short-term bullishness, solid growth prospects, and underlying industry strength, as determined by the four components of our overall POWR Rating.

Bottom Line

UBER should continue to see gains in the upcoming months, based on its continued business growth, favorable outlook, and strong financials.

UBER’s EPS is expected to grow 57% next year and at a rate of 64.3% per annum over the next five years. This outlook should keep UBER’s price momentum alive through 2021. 

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UBER shares were trading at $35.36 per share on Wednesday afternoon, down $0.20 (-0.56%). Year-to-date, UBER has gained 18.90%, versus a 9.96% rise in the benchmark S&P 500 index during the same period.

About the Author: Manisha Chatterjee

Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst. More...

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