Uber's stock chart may look 'scary' - but this bull offers some perspective

By Emily Bary

It 'can pay to simply own the category winners in internet - and let them compound,' Bernstein analyst says

Uber Technologies Inc. shares surged 150% last year, and after that sort of rally, its stock chart admittedly could look "scary," according to a Bernstein analyst.

But how you look at the stock's positioning now depends on how far you're willing to glance out, wrote Bernstein's Nikhil Devnani in a Monday note to clients. Uber (UBER) will report earnings Wednesday and host an investor event next week, and the setup into those events isn't too compelling, in his view, with "expectations continuing to climb."

"Is there a great history of crowded stocks with positive momentum going into investor days?" Devnani asked. "Events like this always make us a little nervous given the emphasis placed on guidance/targets." He noted that Uber's new chief financial officer may want to set conservative but beatable targets, while Wall Street might be looking for more in light of the stock's big move higher.

Looking farther out, however, the case for Uber's stock becomes more attractive, in his view, as "the fundamentals look solid, the businessis now starting to print cash (and lots of it), management has found a beat-and-raise rhythm, and Uber's market leadership position feels more entrenched than ever."

The company has "plenty of buyback potential," he wrote, and investors will get a better sense of the company's ambitions there when it reports results.

For now, perhaps there is a lesson from Meta Platforms Inc. (META), Amazon.com Inc. (AMZN) and the like. "Watching the mega-caps crush numbers yet again is also a good reminder that it can pay to simply own the category winners in internet - and let them compound," Devnani added.

He rates the stock at outperform, though his $70 target is nearly in line with the current price.

-Emily Bary

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02-05-24 1526ET

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