Uber Technologies (NYSE:UBER) stock is taking a ride following its most recent earnings release, but it’s a rough one that will surely scare away some nervous investors. On the other hand, Uber’s top-line results suggest that the company isn’t really in bad shape. Therefore, I see a contrarian opportunity, and I am bullish on UBER stock.
San Francisco-based Uber Technologies operates a popular ride-hailing platform. Reportedly, in the March quarter of this year, Uber commanded a 72% share of the U.S. ride-hailing market. The company’s primary competitor in the U.S. is Lyft (NASDAQ:LYFT).
Uber’s ride-hailing activity is a pretty good barometer of the health of the U.S. economy. The data, as we’ll discuss in a moment, indicates that Americans are still actively using Uber’s services. Granted, the market isn’t in the mood to invest in Uber now – but as always, you don’t have to follow the crowds.
Uber: More Trips, More Bookings, More Sales
If you focus on certain metrics, Uber Technologies delivered solid results in 2024’s first quarter. The company’s reported trips grew 21% year-over-year to 2.6 billion. Believe it or not, this equates to around 28 million Uber trips per day, on average, during Q1 of 2024.
Of course, more trips mean higher gross bookings for Uber. For the first quarter of 2024, Uber recorded $37.7 billion in gross bookings, up 20% year-over-year. So far, it sounds like Uber is doing well, and the American economy isn’t completely falling apart.
All of this should lead to earnings growth, right? Indeed, it did, as Uber’s revenue grew 15% year-over-year to $10.1 billion. This result was roughly in line with Wall Street’s consensus estimate. Hopefully, the market hasn’t become so spoiled that 15% sales growth isn’t good enough anymore.
Furthermore, there’s an encouraging statistic that the market seems to be overlooking. Uber reported quarterly income from operations of $172 million, up $434 million versus the year-earlier quarter. Thus, using that metric, it could be concluded that Uber swung from a loss to positive income. It’s not the most important metric, but it’s worth considering.
Now, I’m going to drop a real whopper on you. Specifically, Uber’s adjusted EBITDA of $1.4 billion represents an 82% year-over-year increase. Judging by that metric, Uber really knocked it out of the park in 2024’s first quarter.
Why Did UBER Stock Drop?
After all of that, you might conclude that Uber Technologies stock should have rocketed higher today. However, the stock is actually down 8.3%. What’s up with that?
There’s a major culprit and a minor one. The minor culprit was Uber’s current-quarter guidance. The company’s outlook calls for second-quarter gross bookings of $38.75 billion to $40.25 billion, which would represent 18% to 23% year-over-year growth on a constant-currency basis.
That sounds pretty good, but the consensus estimate called for second-quarter gross bookings of $40.04 billion. The midpoint of Uber’s guidance range is $39.5 billion, so apparently, 18% to 23% year-over-year growth isn’t good enough (though I think it’s perfectly fine).
The major culprit was Uber’s unexpected Q1-2024 adjusted net loss. Analysts, on average, expected to see Uber earn $0.22 per share, but the actual result was a loss of $0.32 per share.
So, that’s why UBER stock dropped. The market just can’t handle less-than-anticipated forward gross bookings guidance, and it certainly won’t tolerate a quarterly net loss when Wall Street had expected positive income.
Hold on a moment, though. What if Uber’s surprise loss was mainly the result of one-time adverse events? Then, maybe the quarterly loss could be forgivable, and UBER stock would be attractive at its current, reduced price.
As it turns out, Uber’s Q1-2024 net loss of $654 million “includes a $721 million net headwind (pre-tax) due to net unrealized losses related to the revaluation of Uber’s equity investments.” This isn’t the type of event that’s going to happen to Uber every quarter – and without the “unrealized losses,” Uber evidently could have had a profitable quarter.
Surely, Wedbush analyst Scott Devitt understood this when he assigned UBER stock an Outperform rating and an $85 price target. Devitt explained, “The underlying business remains healthy, and we would opportunistically buy any near-term pullbacks in shares,” and I concur 100% with this assessment.
Is UBER Stock a Buy, According to Analysts?
On TipRanks, UBER comes in as a Strong Buy based on 35 Buys and one Hold rating assigned by analysts in the past three months. The average Uber Technologies price target is $89.44, implying 38.4% upside potential.
If you’re wondering which analyst you should follow if you want to buy and sell UBER stock, the most accurate analyst covering the stock (on a one-year timeframe) is Eric Sheridan of Goldman Sachs (NYSE:GS), with an average return of 48.54% per rating and an 82% success rate. Click on the image below to learn more.
Conclusion: Should You Consider UBER Stock?
Uber Technologies and the U.S. consumer, generally, seem to be in pretty good shape. At least, that’s a reasonable conclusion if we focus on Uber’s quarterly trips, bookings, and sales data.
Admittedly, Uber’s quarterly net loss stunned the market. However, I encourage investors to look under the hood and think about whether Uber’s first-quarter issues are permanent or just temporary. With that in mind, I am bullish on UBER stock and would consider it for a long-term portfolio holding.
