This Ride-Sharing Giant Is A Top Pick With Over 50% Upside Expected

According to Jefferies, now is the time to take advantage of Uber shares, and "hitch a ride".

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In the report, Bergman ranked Uber as one of its top picks, with a buy rating and a price target of $50 per share, up from $47 per share previously. It is expected that the company's stock will be able to gain nearly 56% from Friday's close because of the new price target. 

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It is our assessment that Uber's core business lines, which are Ridesharing and Restaurant Delivery, each deal with markets with a value of $1 trillion, which implies that the company has a clearly defined growth runway of at least half a trillion dollars. 

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He added, "We believe UBER's dominant scale and network effect will provide greater incentive to reinvest in customer experience and adoption, which should in turn spur market share growth and increase frequency as the market matures." 

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From 2019 to 2022, Uber's U.S. restaurant delivery segment, which was the company's major contributor to the company's earnings growth, will increase its market value by almost 50 percent.

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In addition to expanding UBER's [total addressable market], Colantuoni said the company's product offerings (mobility, Eats, new verticals, freight, etc.) and geographic diversity have driven cross-sell opportunities and reduced macro risks. Moreover, we anticipate the company will continue to grow its EBITDA as well, which will enhance confidence in long-term profitability as well as propel the company's multiple up in value. 

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In addition, Jefferies estimates Uber One, Uber's subscription-based model, will see more than a two-fold increase in members by 2025 compared to 2017. This expansion of the company's Delivery business will help facilitate the growth of that sector, which has already doubled in recent years since the pandemic started, according to Jefferies.

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As a matter of fact, Colantuoni noted in a statement that a downside scenario could result in the shares dropping by as much as 36%. There is a slow growth rate expected in the Delivery segment, as well as a likely underwhelming improvement in earning margins, which he cited as potential headwinds to growth. There is a possibility that Uber could lose market share to its direct competitors in the Mobility and Delivery areas - which could lead to a drop in its stock price. 

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Before the bell rang on Monday morning, Uber's shares were up 0.4%. Over the past year, Uber's shares have jumped 27.3%, but they have been declining slightly over the last year as well.

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