7 Uber Analysts Break Down Q2 Earnings: 'Risk Is Passing And Stock Oversold'

Uber Technologies Inc (NYSE: UBER) shares gained 5.6% on Thursday after the company reported better-than-expected second-quarter revenue and earnings, but said its core business once again generated a half a billion dollar loss.

Uber reported a second-quarter adjusted EPS of 58 cents on $3.93 billion in revenue. Both numbers exceeded analyst estimates of a 51-cent loss and $3.75 billion, respectively. Revenue was up 105% from a year ago.

Uber reported $8.6 billion in Mobility gross bookings, up 184% year-over-year. Delivery gross bookings were up 85% to $12.9 billion.

Uber reported a $1.1 billion net income for the second quarter thanks to unrealized gains in its stake in DiDi Global Inc - ADR (NYSE: DIDI) and the sale of its self-driving unit to Aurora. Uber reported an operating loss of $1.19 million and an adjusted EBITDA loss of $509 million in the second quarter.

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Delivery Remains Strong: Wedbush analyst Daniel Ives said a rebound in Mobility demand is encouraging.

“We continue to view mobility as a strong play on reopening and believe investors are underappreciating the transitory nature of the driver supply challenges, which should normalize and lead to a significantly stronger marketplace by the end of the year,” Ives wrote.

D.A. Davidson analyst Tom White said the stability of Uber’s Delivery segment even as cities reopen from shutdowns was a bright spot in the quarter.

“Heavy investment in Driver supply caused 2Q Mobility revenues to fall short of our expectations, but the segment’s recovery continues to progress (with July up m/m with improved margins even as UBER has tapered Driver Incentives),” White said.

Driver Incentive Spending Only Temporary: Raymond James analyst Aaron Kessler said increased driver incentives to combat the driver shortage weighed on Uber’s profitability.

“While positive on longer-term fundamentals, we believe shares are fairly valued at current levels (~5x 2022 EV/gross profits),” Kessler wrote.

Morgan Stanley analyst Brian Nowak said the step-up in driver incentives are only a temporary phenomenon.

“As such, we expect Uber’s driver investment to decline significantly into 3Q, modeling company-wide rides take rates to improve by 200bp (to 20.7%),” Nowak wrote.

Long-Term Opportunities Ahead: Needham analyst Bernie McTernan said Uber’s cross-selling opportunities are becoming more clear.

“Central to our thesis on the stock, the combination of mobility and delivery continues to strengthen as riders return, leading to Uber Pass growth and strong retention,” McTernan wrote.

KeyBanc analyst Edward Yruma said Uber is progressing toward a ridesharing supply and demand equilibrium.

“There may be some NT, and hopefully transient, COVID volatility related to UBER’s global footprint, but operational discipline and growth opportunities underpin strong LT risk/reward prospects,” Yruma wrote.

Bank of America analyst Justin Post said second-quarter margins missed expectations but the risk is passing and Uber stock is oversold.

“Overall, a miss quarter for Uber, but with stock down 19% since 1Q earnings on May 5th vs the S&P at +6%, and no material change to 3Q EBITDA expectations or our 2022 ests, we see selloff as overdone,” Post wrote.

Ratings And Price Targets:

• Wedbush has an Outperform rating and a $51 target.
• D.A. Davidson has a Buy rating and a $68 target.
• Raymond James has a Market Perform rating.
• Needham has a Buy rating and a $77 target.
• KeyBanc has an Overweight rating and a $75 target.
• Morgan Stanley has an Overweight rating and a $72 target.
• Bank of America has a Buy rating and a $64 target.