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Stock Analyst Update

Demand for Uber's Delivery Growing; Shares Attractive

Uber's first-quarter top- and bottom-line results beat FactSet consensus estimates.


Uber (UBER) reported first-quarter results with the top and bottom lines beating FactSet consensus estimates. Gross bookings displayed strong growth driven by continuing strength in the delivery business and demand improvement in mobility. The adjusted EBITDA loss in delivery improved from a year ago, while the mobility segment continued to generate positive adjusted EBITDA. Like its peer Lyft, Uber is experiencing limited supply in mobility and expects higher driver acquisition costs in the second quarter, which will pressure mobility take rates and the segment’s bottom line, but we expect it to remain adjusted EBITDA profitable. As we have mentioned before, we think Uber can more easily cross-sell mobility to its existing delivery drivers. In our view, the firm’s revenue diversification strategy is paying off as mobility is showing signs of recovery, while the delivery business continues to display impressive organic and overall growth.

In our view, Uber’s network effect in the mobility and delivery segments remains intact. We are confident that the strong demand side of Uber’s mobility network effect will reignite the supply side and attract drivers back to the platform. We have not made any significant adjustments to our model; we expect Uber to generate full-year positive adjusted EBITDA in 2022 and become GAAP profitable in 2024. While the stock faces public policy risks, we think they are more than priced in at current levels. We are maintaining our $67 fair value estimate and view the stock as attractive.

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Ali Mogharabi does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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