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UBER Stock Price Decreases 13% in a Month: Should You Buy the Dip?
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Shares of Uber Technologies (UBER - Free Report) have declined 13.2% in the past month, underperforming its industry and the S&P 500 Index, of which Uber is a key member. In comparison, shares of rival Lyft (LYFT - Free Report) have dropped 16.6% in the same timeframe.
One-Month Stock Price Performance Comparison
Image Source: Zacks Investment Research
The San Francisco, CA-based ride-hailing company’s shares have dropped on concerns that self-driving cars could eliminate intermediary services. Google's (GOOGL - Free Report) Waymo recently unveiled plans to expand its robotaxi (autonomous vehicle) service to Miami, which has increased investor worries about heightened competition in the rideshare market, hurting the UBER stock. Donald Trump’s plans to push for a federal framework supporting self-driving vehicles have also hit UBER shares.
However, Uber’s robust fundamentals and growth prospects cannot be ignored. For long-term investors, the recent pullback might create an opportunity to buy UBER shares. Currently priced at $60.21, the stock is 30.8% below its 52-week high, leaving ample room for growth.
Reasons Why We Remain Bullish on UBER Stock
Favorable Earnings Estimate Revision: The Zacks Consensus Estimate for earnings per share for 2024 and 2025 has seen upward revisions over the past 60 days. The positive revision trend reflects confidence in UBER’s ability to continue delivering strong financial performances.
Image Source: Zacks Investment Research
Rosy Growth Projections & Surprise History: The Zacks Consensus Estimate for the current and the next-year earnings has been revised upward by 117.2% and 34%, respectively. The Zacks Consensus Estimate for the current and the next-year sales has been revised upward 17.4% and 16.4%, respectively. UBER’s long-term earnings (three to five years) growth rate is 42.5%, way ahead of its industry’s 24.1%. The company has surpassed the Zacks Consensus Estimate for earnings in three of the past four quarters (missing the mark in the other one). The average beat is 83%.
Commendable Expansion Efforts: Even though Uber’s primary business is ridesharing, it has diversified into food delivery and freight over time. Diversification is imperative for big companies to reduce risks, and UBER has excelled in this area. The company has engaged in numerous acquisitions, geographic and product diversifications, and innovations. Uber’s endeavors to expand into international markets are commendable and provide it with the benefits of geographical diversification. Prudent investments enable Uber to extend services and solidify its comprehensive offerings.
Key Segments Performing Well: Uber’s ridesharing and delivery platforms are growing in popularity. This is generating strong demand, which, along with the latest growth initiatives and continued cost discipline, are driving the company’s results. In the third quarter of 2024 , total gross bookings increased 16% year over year to $41 billion, with trips rising 17% to 2.9 billion. Gross bookings are likely to be strong going forward, keeping Uber in good shape.
We expect gross bookings from the Mobility segment in the December-end quarter to grow 20.6% on a year-over-year basis. We expect gross bookings from the Delivery segment in the December-end quarter to grow 15.2% on a year-over-year basis. Total trips are expected to move up 17.5% year over year in the September-end quarter, per our model.
UBER Shares Trade at a Discount
The UBER stock is quite cheap, as its Value Score of B does not suggest a stretched valuation at this moment.
In terms of price-to-sales (forward 12-month), UBER is trading at 2.5X, lower than its 5-year median of 3.03X and the industry’s 5.81X.
Image Source: Zacks Investment Research
Final Verdict: Buy UBER Stock Now
While Uber shares have suffered lately due to robotaxi-related fears, its strong long-term growth prospects and other tailwinds mentioned throughout the write-up create a solid investment case for forward-looking investors. Combined with its attractive valuation and strong position in the ridesharing market, investors with a higher risk tolerance could find this an opportune time to buy the UBER stock.
Despite the recent fears, Uber has enough factors in its favor, which leads us to conclude that this Zacks Rank #2 (Buy) undervalued stock is an ideal candidate for addition to one’s portfolio. You can see the complete list of today’s Zacks #1 Rank stocks here.
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UBER Stock Price Decreases 13% in a Month: Should You Buy the Dip?
Shares of Uber Technologies (UBER - Free Report) have declined 13.2% in the past month, underperforming its industry and the S&P 500 Index, of which Uber is a key member. In comparison, shares of rival Lyft (LYFT - Free Report) have dropped 16.6% in the same timeframe.
One-Month Stock Price Performance Comparison
The San Francisco, CA-based ride-hailing company’s shares have dropped on concerns that self-driving cars could eliminate intermediary services. Google's (GOOGL - Free Report) Waymo recently unveiled plans to expand its robotaxi (autonomous vehicle) service to Miami, which has increased investor worries about heightened competition in the rideshare market, hurting the UBER stock. Donald Trump’s plans to push for a federal framework supporting self-driving vehicles have also hit UBER shares.
However, Uber’s robust fundamentals and growth prospects cannot be ignored. For long-term investors, the recent pullback might create an opportunity to buy UBER shares. Currently priced at $60.21, the stock is 30.8% below its 52-week high, leaving ample room for growth.
Reasons Why We Remain Bullish on UBER Stock
Favorable Earnings Estimate Revision: The Zacks Consensus Estimate for earnings per share for 2024 and 2025 has seen upward revisions over the past 60 days. The positive revision trend reflects confidence in UBER’s ability to continue delivering strong financial performances.
Rosy Growth Projections & Surprise History: The Zacks Consensus Estimate for the current and the next-year earnings has been revised upward by 117.2% and 34%, respectively. The Zacks Consensus Estimate for the current and the next-year sales has been revised upward 17.4% and 16.4%, respectively. UBER’s long-term earnings (three to five years) growth rate is 42.5%, way ahead of its industry’s 24.1%. The company has surpassed the Zacks Consensus Estimate for earnings in three of the past four quarters (missing the mark in the other one). The average beat is 83%.
Commendable Expansion Efforts: Even though Uber’s primary business is ridesharing, it has diversified into food delivery and freight over time. Diversification is imperative for big companies to reduce risks, and UBER has excelled in this area. The company has engaged in numerous acquisitions, geographic and product diversifications, and innovations. Uber’s endeavors to expand into international markets are commendable and provide it with the benefits of geographical diversification. Prudent investments enable Uber to extend services and solidify its comprehensive offerings.
Key Segments Performing Well: Uber’s ridesharing and delivery platforms are growing in popularity. This is generating strong demand, which, along with the latest growth initiatives and continued cost discipline, are driving the company’s results. In the third quarter of 2024 , total gross bookings increased 16% year over year to $41 billion, with trips rising 17% to 2.9 billion. Gross bookings are likely to be strong going forward, keeping Uber in good shape.
We expect gross bookings from the Mobility segment in the December-end quarter to grow 20.6% on a year-over-year basis. We expect gross bookings from the Delivery segment in the December-end quarter to grow 15.2% on a year-over-year basis. Total trips are expected to move up 17.5% year over year in the September-end quarter, per our model.
UBER Shares Trade at a Discount
The UBER stock is quite cheap, as its Value Score of B does not suggest a stretched valuation at this moment.
In terms of price-to-sales (forward 12-month), UBER is trading at 2.5X, lower than its 5-year median of 3.03X and the industry’s 5.81X.
Final Verdict: Buy UBER Stock Now
While Uber shares have suffered lately due to robotaxi-related fears, its strong long-term growth prospects and other tailwinds mentioned throughout the write-up create a solid investment case for forward-looking investors. Combined with its attractive valuation and strong position in the ridesharing market, investors with a higher risk tolerance could find this an opportune time to buy the UBER stock.
Despite the recent fears, Uber has enough factors in its favor, which leads us to conclude that this Zacks Rank #2 (Buy) undervalued stock is an ideal candidate for addition to one’s portfolio. You can see the complete list of today’s Zacks #1 Rank stocks here.