Despite losing investor confidence in the context of Covid continuing to face difficulties, Uber Analysts say it could position itself for a return in 2022.
“We think this year will be different from the outlook for an EBITDA adjustment and focus on finding groceries despite mobility uncertainty,” Needham analysts said in a note today. Friday. The company named car-sharing stock as its top pick for 2022, despite lowering its price target to $75 a share from $77 a share.
Uber said in the fourth quarter it expected adjusted EBITDA from $25 million to $75 million, which would be its second quarter in terms of profit. Managing Director Dara Khosrowshahi told Bloomberg last month he expects the company to be near the top of that forecast.
“Post-Covid we are an all-weather company and think we can really succeed and thrive in any environment,” Khosrowshahi said, adding that he is “confident.” ” that the company will hit an all-time high in 2022.
Jefferies analysts also said on Friday that they see a quick path to profitability from “harvesting the benefits of working hard to streamline portfolios over the years over the years. recently + gaining scale in Mobile & Delivery.”
Several factors have led some analysts to name rideshare stock, which has fallen nearly 18 percent in 2021, among their top picks for the new year.
Delivery will continue to grow
The company has invested heavily in the grocery, beverage, and convenience delivery segments since the pandemic began. It has alcohol delivery service Drizly last February. After negotiations failed to buy food delivery service GrubHub, Uber bought it Roommates.
Focusing its acquisition efforts on its Food segment during the pandemic has allowed the company to maintain some of its business despite reduced travel. Investors believe it will also continue to push the stock forward. Needham, a delivery optimist, said 2022 “could be the year of groceries.”
“We expect Uber to announce additional partnerships and geographic expansion in their grocery delivery space in 2022 and view these potential developments as positive,” the analysts said. extreme,” said the analysts.
Mobility is back
Some analysts expect the mobile segment to continue to improve next year.
“Aside from Omicron’s difficulties, we believe UBER is particularly well-loaned to benefit from a fuller reopening, assuming 2022 with particularly strong exposure to air freight.” air and business travel, this will bring about a shift in Mobility’s gross bookings operating ratio as well as its segment level, RBC Capital Markets analysts said on Thursday.
Jefferies analysts said they expect Uber’s ride-hailing bookings to fully recover in 2022 from 2019.
That also comes with an increase in drivers. Uber has been grappling with a supply and demand imbalance because of the pandemic, which has led to price increases and increased wait times. Uber says metrics have continued to improve when it comes to attracting and retaining new drivers, but there’s still room for growth.
Of course, its recovery could still be affected by new coronavirus variants or the possibility of an economic shutdown. A tightening labor market could also “constrain unit-sharing economics,” said Wolfe Research analysts in a note Tuesday.
Regulation still exists, but investors look confident
Another important factor in 2022 is the company’s regulatory environment.
“Since going public, a consistent stumbling block has been an increase in regulation, particularly around driver classification,” RBC analysts wrote on Thursday. Lawmakers have pushed for a reclassification of contract workers as full-time employees, in an effort to ensure things like minimum wages and benefits. But categorizing drivers as contractors allows companies to avoid the costly benefits associated with full-time employment, such as unemployment insurance.
Gig economy companies, including Uber, won a provisional 2020 victory in California, when voters approved Proposition 22 by a majority. That ballot measure effectively exempts some contract economy companies from the state’s recently enacted law, Congressional Bill 5, which classifies their workers as full-time employees. .
But it was a short victory last year when a California court found that Proposition 22 was unconstitutional because “it limits the future Legislature’s power to identify app-based drivers as workers subject to compensation laws.” usually for workers.” That makes the entire voting measure “unenforceable.”
A coalition representing the companies said they plan to appeal, and investors appear to have dismissed the news. Shares of Uber closed that day.
Now, other states are following in California’s initial steps.
“We anticipate a positive regulatory resolution to contract labor issues at the state level as NY and MA are likely to follow a similar track to Proposition 22 in CA,” said Mizuho analysts. ,” Mizuho analysts said in a Friday note. “In New York, a pending bill keeping contract workers as contractors with the backing of two major unions is poised to be voted on by the State Congress after the Holidays. In Massachusetts, measurement the ballot is expected to be voted on on Election Day this year with strong support from drivers.”
— Michael Bloom of CNBC contributed to this repo.
