1 Wall Street Analyst Thinks Uber Stock Is Going to $90. Is It a Buy Around $67?

view original post

Uber Technologies (NYSE: UBER) received mixed reactions after reporting earnings on May 8. While the ride-hailing platform grew sales and monthly active users by 21% and 15%, respectively, the market fretted over the company’s net loss stemming from valuation changes in investments it holds.

Still, Needham analyst Bernie McTernan set a price target of $90 for Uber over the next year, citing the company’s 82% adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) growth as a critical reason for optimism.

Here’s why I can’t help but agree with McTernan’s belief that Uber’s operations are streamlining despite this one-off loss in net income this quarter.

Pairing impressive cash generation with growth

Generating over $875 million in free cash flow (FCF) — even after removing stock-based compensation — Uber boosted its FCF margin to 9%. This robust result paints a far different picture of the company’s well-being than the net loss that is garnering headlines.

Its booming membership program, Uber One, powers this cash-generating charge. Now 19 million members strong, Uber One creates over $1 billion annually in FCF through subscription fees. Members receive waived delivery fees, lowered service fees, and a 5% credit on rides, and have proven to be very valuable for Uber, accounting for 32% of bookings in the first quarter.

However, despite showing signs of becoming a genuine cash cow as its two-sided network expands, Uber’s growth story is far from over. Through its partnership with Maplebear, Instacart’s parent company, Uber is moving full speed ahead in its efforts to build out its grocery delivery business.

While the deal has sparked rumors of a potential acquisition, Uber may be more interested in the cross-promotion potential of Instacart’s 14 million members. By providing Instacart+ members with free delivery on Uber Eats orders over $35, the company hopes to continue converting delivery consumers into new mobility riders and vice versa.

Trading at a reasonable 34 times FCF, guiding for roughly 20% sales growth in the second quarter, and armed with the potential development of the Instacart partnership, Uber remains one of my favorite growth stocks.

Should you invest $1,000 in Uber Technologies right now?

Before you buy stock in Uber Technologies, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Uber Technologies wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $553,880!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

See the 10 stocks »

*Stock Advisor returns as of May 13, 2024

Josh Kohn-Lindquist has positions in Uber Technologies. The Motley Fool has positions in and recommends Uber Technologies. The Motley Fool has a disclosure policy.

1 Wall Street Analyst Thinks Uber Stock Is Going to $90. Is It a Buy Around $67? was originally published by The Motley Fool