Uber stock weathered a tough 2021, shedding 18%, but that may change in 2022. Uber CEO says the company can now show growth in any environment. So should you buy Uber stock in 2022? Market analysts give their opinions.
The COVID-19 pandemic and its new strains have hit the Uber Ride Sharing (UBER) business, but have strengthened the delivery company's business.
Uber shares fell 18% in 2021, but rebounded slightly over the past 30 days, up 9%.
Be that as it may, as of early 2022, Uber is pretty much a company that has changed over the year.
Last year, Uber continued to divest its loss-making subsidiaries (the company sold its autonomous driving division Aurora in December 2020 ) while making acquisitions for the booming delivery business.
Last February, Uber acquired leading alcohol delivery company Drizly for $1.1 billion, following the $2.65 billion purchase of delivery service Postmates in July 2020.
To expand its cargo division, Uber Freight, the company signed a $2.25 billion acquisition of Transplace, a leading global logistics technology provider.
By leveraging its delivery divisions, including Uber Eat and Freight, the company is setting the stage for greater diversification and less dependence on the revenues of the passenger transportation business, which have plummeted due to the pandemic.
In the third quarter of 2021 ending September 30, Uber Eats delivery revenues were again higher than taxi revenues and continued to grow at a faster pace, according to Uber's latest financial report.
Uber's quarterly earnings statistics for the last two quarters show growth of 75% and 55% compared to the same period a year ago.
In addition, the company's management expects EBITDA (before interest, taxes, depreciation, and amortization) of between $25 and $75 million, which will mark the second quarter of profitability.
Market analysts' opinions on buying Uber stock in 2022
CEO Dara Khosrowshahi, in an interview with Bloomberg last month, said he expects the company to get closer to the upper end of that forecast.
“After Covid, we believe we can really succeed and grow in any environment,” Khosrowshahi said, adding that he is “confident” the company will hit record highs in 2022.
In December, investment firm UBS rated Uber shares with a “buy” rating and a target price of $80. That's double the price of $41.51 per share for Uber at the close of trading on Friday, January 7.
On Friday, Needham analysts named Uber the best choice for 2022, also announced a “buy” rating, but slightly reduced their target price from $77 to $75.
Experts are optimistic as they believe delivery service revenues will hit new records in 2022.
“We expect Uber to announce additional partnerships and geographic expansion of product delivery in 2022 and view these potential developments as optimistic,” Needham said.
Jefferies analysts also said Friday that they are forecasting an accelerated path to profit for Uber by "reaping the fruits of the hard work of optimizing the portfolio in recent years + achieving scale in the taxi and delivery business."
Jefferies expects Uber taxi bookings to recover fully in 2022 from 2019.
Analysts at RBC Capital Markets also noted that Uber will see a jump in profits once air travel recovers.
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Following an imbalance in supply and demand that spiked prices and increased taxi waiting times during the pandemic, Uber's performance has improved by attracting and retaining new drivers. However, according to analysts at Wolfe Research, the problems of the US labor market could continue to negatively affect Uber's business.
Finally, Uber's list of risks still includes the question of how its employees are classified according to US law.
In 2020, Uber and other companies with a similar operating model won a temporary victory in California, as residents of the state voted in "Proposition 22" - the ability to classify employees of these companies as contract workers. However, last year Proposition 22 was declared unconstitutional by a Californian court because it does not provide for legal benefits and social benefits for workers.
If Uber is forced to classify its drivers and other employees as full-time, the company will have to pay benefits and cover unemployment insurance. This will greatly increase costs and pose a risk to profit. This year, the regulators are to make the final decisions on this issue.
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