Uber (NYSE: UBER) stock has endured a volatile 2021, with shares tumbling 23.5% year-to-date. Many analysts have stood by the name as recent headwinds could prove temporary in nature, as the company continues to invest in its innovative capabilities.
Undoubtedly, labour woes and a wide range of other question marks have left investors scratching their heads on the firm’s ability to sustain a push into profitability with the threat of autonomous vehicles (AVs) that could arrive as soon as late 2025 or early 2026.
Until AVs go mainstream, though, don’t expect the ride-hailing giant to go down without a fight, as it looks to invest in measures to raise the barriers to entry while exploring new means of transportation. If AVs don’t hit the roads over the next decade, Uber stock may very well be one of the most undervalued tech stocks on the market.
In any case, I remain bullish on Uber stock, as I believe most concerns are overblown and already baked into the shares price at $39 and change.
Furthermore, there are intriguing growth levers that Uber can pull to stay ahead of rivals seeking to grab a slice of the ride-hailing and transportation market.
Uber’s Large Moat
Uber isn’t just a sitting duck that could get shot down once AVs hit the roads. Despite divesting its autonomous driving unit Advanced Technologies Group (ATG) to a startup named Aurora Innovation, the company has the means to transition into the AV age.
How so? Uber’s moat is in its treasure trove of data.
Although its reputation with drivers and riders could use a boost, the firm does have a powerful brand and the means to optimize travel between two or more locations. Any other firm can replicate such algorithms, but I’d argue that would be a case of easier said than done. Indeed, there’s a lot of complexity and innovation going on behind the scenes when users hit that “Get a Ride” button.
Further, Uber doesn’t need to be an automaker or an AV software developer to continue thriving in the AV age whenever it arrives. The company can invest in a massive fleet, possibly from the firm it sold its ATG unit to.
Indeed, a fleet would require a considerable investment, and Uber would be challenged by the likes of Tesla (TSLA) if Elon Musk’s self-driving Tesla fleet ambitions were to come true.
Such a scenario would bring down the ride-sharing duopoly comprised of Uber and rival Lyft (LYFT). That said, the implications of such may very well prove to be significantly exaggerated.
Wall Street’s Take
According to TipRanks’ consensus analyst rating, UBER stock comes in as a Strong Buy. Out of 20 analyst ratings, there are 19 Buy recommendations and one Hold recommendation.
The average Uber price target is $69.55. Analyst price targets range from a low of $50 per share to a high of $82 per share.
Can Uber Power to Price Target?
The consensus price target of $69.55 calls for an incredible 77.2% upside. With an overwhelming number of Buy ratings on the name and an uber-depressed (excuse the pun) valuation, with the stock trading at around 4.6 times sales, UBER shares may very well be a worthy bargain.
Uber has an incredibly competent management team who’s shown a willingness to explore new verticals in the transportation space. After expanding into food delivery, Uber is a transportation company, not just a ride-hailer. I think many investors are misunderstanding the company and the growth prospects at hand.
With the next frontier including ultra-fast-delivery like the service offered by food-delivery peer DoorDash (DASH), I wouldn’t discount Uber’s top-line growth prospects, as the firm readies itself for a driverless age.
Disclosure: Joey Frenette doesn’t own shares of any mentioned companies at the time of publication.
Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of TipRanks or its affiliates Read full disclaimer >
