Bernstein analyst Nikhil Devnani has expressed optimism about the future of Uber Technologies Inc.’s stock in a note to clients. He reiterated his stance that Uber shares are his top pick and raised his price target from $45 to $50, adding that if continued profit beats persist, the stock could reach $55 to $60. Devnani believes that Uber is experiencing an earnings and free cash flow inflection point that places it ahead of smaller competitors as they struggle to meet increasing costs of capital.
According to Devnani, Uber is benefitting from a more logical pricing landscape in the ride-hailing industry, as it continues to generate solid margins by growing or maintaining market shares in key regions. He anticipates that the firm’s free cash flow will rise to almost $6 billion by 2025, making Uber “one of the most compelling FCF growth stories in Internet over the next 2-3 years.”
Uber’s Potential Inclusion in S&P 500 Could Lead to Stronger Performance
A possible catalyst for Uber’s future success is its potential inclusion in the S&P 500, which would only occur if the ride-hailing company reports GAAP profits over a trailing-12-month basis and in the most recent quarter leading up to its potential inclusion. Although the company’s equity stakes could affect its ability to reach this goal, some analysts believe it could happen by the second half of 2024.
Analysts at Bernstein Research have also noted that stocks tend to perform well in the six to twelve months leading up to their inclusion in the S&P 500. Additionally, consistently improving profitability and a stronger balance sheet could contribute to better credit ratings beyond 2024.
Barclays analyst Ross Sandler is among those who are optimistic about Uber’s future, having recently raised his price target for Uber shares to $57 from $45. He believes that the price could even reach $70 in his own upside case.
Uber’s stock has already seen an increase of over 80% since the beginning of 2023, while its smaller rival, Lyft Inc., has seen an 8% decrease in share price over the same period.