Uber Technologies Inc

Uber Technologies Inc. (NYSE: UBER) is a technology company that creates and manages software that enables a range of services on its platform. Consumers are connected to ride service providers, businesses, and food delivery services, as well as public transit networks, through the company. Mobility, Delivery, and Freight are among its segments.

Latest News

• By 2025, BP and Uber want to have more than 3,000 retail outlets available on Uber Eats as part of a new worldwide strategic convenience collaboration. The new alliance will include retail locations in Australia, New Zealand, Poland, South Africa, and the United States' west coast. For the first time this year, the app will include sites in the United Kingdom and the eastern United States, with ambitions to expand to additional European regions in 2023.
• On May 4, 2022, Uber Technologies released its financial results for the first quarter of FY22, stating that Q1 results excelled year-over-year, with a positive forecast for the second quarter.

Key Takeaways from Q1 FY22 financial results

• Gross Bookings up 35% year over year to USD 26.4 billion, or 39% in constant currency, with Mobility Gross Bookings up 58 percent year over year to USD 10.7 billion and Delivery Gross Bookings up 12 percent year over year to USD 13.9 billion. Trips increased 18 percent year over year to 1.71 billion, or over 19 million trips each day on average.
• Revenue increased by 136 percent year over year to USD 6.9 billion, or 141 percent in constant currency, owing to the acquisition of Transplace by Freight, a change in the business model for our UK Mobility business, and a more straightforward comparison in Q1 2021 due to the accrual for historical claims in the UK.
• Uber Technologies, Inc.'s net loss was USD 5.9 billion, including a USD 5.6 billion (pre-tax) headwind from equity investments, principally owing to aggregate unrealized losses from the revaluation of Uber's Grab, Aurora, and Didi stakes. In addition, USD 359 million in stock-based compensation expense is included in the net loss.
• USD 168 million in adjusted EBITDA, up by USD 527 million year over year. Adjusted EBITDA margin as a percentage of Gross Bookings was 0.6%, up from (1.8) % in Q1 2021. On a year-over-year basis, this amounts to a 7.6% incremental margin as a percentage of Gross Bookings.

Balance sheet and cash position

• Operating activities contributed USD 15 million in net cash, up by USD 626 million year over year. Free cash flow, which is defined as net cash flows from operating activities with fewer capital expenditures, was USD 47 million, up by USD 635 million year over year.
• At the conclusion of the first quarter, the company had USD 4.2 billion in unrestricted cash and cash equivalents, with total debt of USD 9.27 billion.

Key Risks

• Geographic Concentration Risk: Only five metro locations in the US, Brazil and the UK accounted for 23% of UBER's gross mobility bookings in FY21: Chicago, Los Angeles, and New York City in the US, Sao Paulo in Brazil, and London in the UK. Because of their geographical concentration, economic, social, climatic, and regulatory aspects of these large metropolitan areas have an influence on the company’s operations and financial implications.

Outlook

As of Q1FY22, UBER expects Gross Bookings of USD 28.5 – 29.5 billion, together with adjusted EBITDA of USD 240 – 270 million for the upcoming Q2 FY22.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

Source: REFINITIV, Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company's FY1 trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks. 

Stock Recommendation

Over the past six months, UBER's share price has corrected by 38.54%. The stock is currently leaning towards the lower end of its 52-week range of USD 21.28 to USD 52.36. The price is currently consolidating near the lowest levels of 52 weeks and has formed a bullish divergence on the RSI which can be seen in the chart below. We have valued the stock using the EV/Sales multiple-based relative valuation method and arrived at a target price of USD 27.73. We believe that the company is trading at a premium from its peer's average contemplating strong fundamentals, competitive advantages in market share, and a good cash position which also gives bullish estimates for the upcoming near future.

Considering the strong fundamentals, robust top-line results, associated risk, positive outlook, and current valuation, we give a "Buy" recommendation on the stock at the current price of USD 23.35 down 1.35%, as of May 31, 2022, at 10:55 AM PDT.

One Year Technical Chart, as of May 31, 2022, at 10:55 AM PDT. Data Source: REFINITIV, Analysis by Kalkine Group

Technical Analysis Summary:

*Current Price as of May 31, 2022, at 10:55 AM PDT.

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and the uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavorable movement in the stock prices.

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decisions should be made depending on the investors’ appetite for upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above. 

Note 3: The report publishing date is as per the Pacific Time Zone.