No Sign of Upside Yet By TipRanks
Uber Technologies (NYSE:) develops platforms that allow for independent ride-sharing and food deliveries. The stock is a bearish investment. (See Uber stock charts on TipRanks)
Uber’s series of management issues persist. Sukumar Rathnam is the head of engineering at the company. This follows a string of managerial departures that have occurred since the outbreak of the pandemic. Rathnam had been in this job just over one year, before tensions among the management led to his resignation.
Uber’s C-suite has been struggling to achieve the right mix since it was listed as a public company. This has caused an increase in stock prices and upset investors.
Struggling for Profitability
Uber managed to beat analysts’ expectations in its Q2 earnings report, with a revenue beat of $167.18 million and an EPS beat of $1.07. However, the company is still unprofitable and there are growing concerns.
Uber trades at a margin -27.39% EV/EBITDA, while the sector is trading at a margin 13.41%. It’s a slight improvement from the sector’s 5-year average, which is 52.60%. However, it shows no indication of operational efficiency. The total operating expense (66.38%) still exceeds that of 2018.
One can always downplay the trajectory of a company’s profitability margins during a growth phase. Uber’s growth metrics still indicate that Uber is not growing fast enough for its stock to be worth the price.
The Price/Sales measurement can be used at all stages of a company’s life cycle, unlike Price/Earnings. To justify current stock prices, you would expect your PS ratio between 1.00 and 2.00. Uber’s ratio is 5.65. This ratio is significantly higher than that of the sector average, 255.29%, and also surpasses the benchmark.
It is significantly overvalued if the stock price is based on future cash flows. A good price/cash flow ratio is usually below 15.00, but Uber’s forward ratio of 394.15 exceeds that by a mile. Additionally, Uber’s negative free cash flow yield (-3.63%) would make any claims of future growth illegitimate.
Wall Street’s Take
The average Uber price target is $68.52, with an upside of 72.38%.
Wall Street views the stock as a Strong Buy with 23 Buy ratings, and 2 Hold ratings. Wall Street has rated it highly since the IPO. However, we have yet to see any significant gains. You will still rate it a buy if you base your intuition on the fact that the stock is a good investment. However, the data shows otherwise. It is not the only thing holding it back. C-suite, driver contract and other issues still play an important role. Uber’s track record has been fraught with controversy. It’s unlikely that it will cool down.
Disclosure: Steve Gray Booyens didn’t hold any positions in the securities discussed in this article at the time it was published.
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