Uber’s (UBER) debut on the stock market at the beginning of May was among the largest ever, but so far investors aren’t too sure how to analyze the company. While the company has high hopes for the future — including with self-driving cars and being the go-to destination for all transportation — the short-term looks murky. Uber continues to burn through cash, especially as it expands into more cities around the world, while drivers are increasingly unhappy with the way the company treats them.
But at the end of the day, the company is growing its revenue and out playing its rivals. Lloyd Walmsley of Deutsche Bank sees this as a reason to be bullish, as he maintains his Buy rating on UBER stock, with $58 price target, which implies nearly 32% upside from current levels. (To watch the Walmsley's track record, click here)
Walmsley noted, "We are bullish on Uber and see continued evidence the competitive market continues to improve, with reports from drivers that Lyft (not covered) has communicated plans to reduce driver payouts 4-5% on two drive modes broadly across the US. We see lower driver payouts on stable consumer pricing leading to improving unit economics in the form of improving revenue take-rates. While this seems to be catch-up to lower driver payouts at Uber on similar (and somewhat limited) ride types, we view Lyft moving to Uber as a clear sign competition is rationalizing in the US and feel better about our outlook for improving take rates at Uber."
Another factor in Walmsley’s opinion is Uber’s performance in Latin America. The analyst believes “the Latin American market is also stable for Uber,” as the company continues to reach beyond the US. Furthermore, Walmsley believes “fears around competition in the UK are overblown,” saying Bolt and Ola are not meaningful threats to the giant.
Uber announced its first-ever quarterly earnings at the end of May, reporting a loss of about $1 billion on revenue of $3 billion, about 20% higher than this time last year. Total bookings increased 34% to more than $14 billion, as active users rose to 93 million. While perhaps its market cap of $74 billion is not justified by its earnings, many are still looking to the future when (the hope is) labor costs are cut and the company sees stability in foreign markets.
All in all, though only a handful of analysts were bullish on Uber at the time of its debut, more and more analysts are coming around. TipRanks analysis of 27 analyst ratings shows a consensus Strong Buy rating, with 21 analysts recommending Buy and six Holding. The average price target for the stock stands at $54.23, suggesting the stock can rise about 23% from current levels.
Crypto Move Boosts Facebook Stock, But How Will It Play In Long Term?
With the tech world going crazy over Facebook (FB) recently announcing its new cryptocurrency Libra, FB stock is responding in kind. Up double-digits this month, many are excited over the company’s new task of making a worldwide currency, which will be used by Facebook users to buy items on the platform and pay each other through Messenger. While crypto’s best came last year, there is still hope among many that it will eventually become mainstream. Facebook hopes to play a role in this, as the company’s massive platform will allow it to provide security and regulation.
Walmsley has questions about the new coin, but overall, the analyst is maintaining his Buy rating on Facebook stock with $220 price target, which implies nearly 23% from current levels. (To watch Walmsley's track record, click here)
Though Walmsley says he likes the strategic play with Libra and Facebook-developed digital wallet Calibra and the magnitude of the ambition behind it, he still has many questions around whether it can really live up to the recent hype.
The big question is whether Libra can scale. If this happens, he Walmsley says “reduced friction in E-commerce can increase the value of Facebook ads, and it can generate interest income on the currency collateral and open the door to more financial products.” Essentially, it will open up new revenue streams for a company that relies (almost) exclusively on ad income.
Walmsley also believes that the coin adds “more utility to core Facebook” and will play a role in “reducing the risk users simply leave the...app.” Further, it “enhances the utility of WhatsApp and Messenger, moving them a (small) step closer towards replicating the WeChat’s SuperApp functionality,” by making it extremely simple and safe to send money to peers and sellers.
Though Walmsley is positive on the new coin from a product standpoint, as it will help drive revenue and increase engagement on Facebook, he is concerned about regulation. The analyst points out that “intense regulatory scrutiny, lingering trust issues with Facebook, management by committee - among other concerns - weigh heavily in our minds vis-a-vis the ultimate success of the project.” The company is currently under the microscope in Europe and the US, and an attempt to now get into finance will most likely pull other regulatory agencies into the matter. Even so, given Facebook’s prowess across the line, the analyst remains a bull and sees “healthy upside potential to [his] $220 target.”
All in all, this latest move is expected to make the popular company even more so. Most analysts on Wall Streets are out rooting for this social media titan to be a winning stock pick, as TipRanks analytics showcase FB as a Strong Buy. Based on 30 analysts polled in the last 3 months, 35 rate a Buy on Facebook stock while 3 maintain a Hold. The 12-month average price target stands at $220.20, marking a nearly 15% upside from where the stock is currently trading.
