Analyst Upgrade Drives Uber To 2-Year High, Despite Court Ruling

Key Points

• Uber has seen its stock rise to a two-year high despite labor-law challenges.
• The stock has shown significant gains in recent months, with increases of 22.16% in May, 13.81% in June, and 9.82% in July.
• In its most recent quarter, Uber posted a 29% increase in revenue, reaching $8.823 billion.
• Wall Street analysts expect Uber to earn 67 cents per share this year and $1.44 per share in 2024.
• The stock is still actionable after pulling back, then rallying above a buy point north of $45.24.

The constant, unrelenting threat of labor-law challenges and wage increases hasn’t hurt Uber Technologies Inc.’s NASDAQ: UBER ride to a two-year high. 

The stock is still actionable after pulling back, then rallying above a buy point north of $45.24.

Uber, which has been a volatile stock since its 2019 IPO, has been driving higher recently, advancing 22.16% in May, 13.81% in June, and 9.82% so far in July. An analyst upgrade helped boost the price in the July 18 session. 

A look at the Uber Technologies chart shows the stock racing out of a consolidation in early May, after its most recent quarterly report. In the quarter, Uber grew revenue by 29%, to $8.823 billion. It lost 8 cents a share, narrower than the year-ago loss of $3.03 a share. 

Wall Street Expects Return To Profitability

The company was profitable in 2018, before going public, and has had profitable quarters here and there, but on a yearly basis, has been in the red since 2018. That’s not unusual for a newly public company, but Wall Street expects Uber to earn 67 cents a share this year, with that number rising to $1.44 per share in 2024, an increase of 114%. 

MarketBeat’s Uber Technologies earnings data reveal that the company has a spotty history when it comes to beating or missing earnings views. However, in the past two quarters, it exceeded expectations on the top and bottom lines. 

After its most recent earnings and revenue beat, some media pundits noted that it was outperforming “tech,” but despite its tech-heavy logistics operations, Uber ultimately serves consumers and business customers who need to move themselves or some stuff from one place to another. On that level, it’s not necessarily a fair comparison with infotech whose deliverable product is data storage or transmission. 

Uber’s analyst ratings show a consensus view of “buy” on the stock, with a price target of $50.88, an upside of 7.32%. 

Since its earnings report in May, every analyst action has been a price target increase, or a ratings upgrade. 

Growth Despite Unfavorable Court Ruling

All this optimism comes despite a background of labor-related noise that could be a distraction from growth, but doesn’t appear to be. 

Uber must face a California lawsuit claiming it should have covered UberEats drivers' work-related expenses, according to a ruling by the state's Supreme Court. The court stated that the driver did not waive his right to sue on behalf of a larger group of workers, even though he signed an agreement for private arbitration. The decision undermines a previous U.S. Supreme Court ruling and could lead to more large-scale lawsuits against California employers. 

Legal analysts say the ruling may prompt companies to reconsider forcing claims into arbitration if similar lawsuits can still proceed in court.

Some of Uber’s business units, such as the ride-share service and the Uber Eats food delivery service, are fairly well known to consumers. Another service, Uber For Business, can help arrange and streamline business travel for corporations, or even give small business customers a ride, courtesy of the business. It can also be a courier for items to be delivered to a meeting, or deliver the meeting participants themselves. 

Uber Freight is a shipping and hauling service that makes use of the company’s logistics expertise. Its digital platform connects shippers and carriers.

Uber Health is a specialized service that focuses on transporting patients to and from medical appointments. It aims to simplify healthcare transportation by providing reliable, on-demand rides.

Will Autonomous Driving Be Hot In Phoenix?

The company is implementing new fleet technologies, as well. In May, it said it was teaming up with Waymo, a subsidiary of Alphabet Inc. NASDAQ: GOOGL, to bring autonomous driving to the Uber platform. According to the companies, this integration will launch publicly later this year with a set number of Waymo vehicles in Phoenix, and will include local deliveries and ride-hailing trips.

Uber shares closed at $47.41 on July 18, up $1.90 or 4.17%, in trading volume 91% heavier than normal. The upside action came as news broke about the California court ruling that was unfavorable to the company, but it was an upgrade from Roth MKM analyst Rohit Kulkarn sent the stock higher. 

Kulkarn boosted his price target substantially, to $59 from $46, and maintained his “buy” rating. In his note, Kulkarn also increased his earnings forecast, and praised other operating metrics, such as free cash flow.