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A Wolfe Research analyst remains bullish on Uber (NYSE:UBER), stating it remains a top idea in mobility for the second half of the year.
The analyst, who has an Outperform rating and $37 price target on the stock, said this is due to the “significant runway for profitability and FCF growth in 2H22 and FY23.”
“Shares of UBER have outperformed the Nasdaq by 14-pts since 2Q results came in with healthy upside on EBITDA and FCF. As we look ahead, we believe two key debates are likely to drive share price outperformance in 2H and beyond.”
The first key point the analyst pointed to is their belief that marketplace growth will not slow while Uber prioritizes profitability.
“Although lower incentives/investments is a headwind to NT volume growth, UBER’s growth over the medium-long term, in our view, primarily depends on product success and better execution. The company’s execution, in terms of unlocking sustainable earner growth on the platform, has been solid post the pandemic,” wrote the analyst. “Overall, we see several paths for UBER to deliver solid growth over the next few years to reach FY24 targets.”
The second point is the firm’s belief that Uber can deliver 7%+ incremental EBITDA margins from FY22-FY24E.
“A lot has changed since and the company delivered ~12% incremental margins in 2Q22. Beyond UBER’s efforts to prioritize investments efficiently, competitive landscape in many markets have improved meaningfully since. In our view, these dynamics have enabled the company’s path for sustainable 7%+ incr. margins easier over the next several quarters,” the analyst concluded.
