Introduction:
Shares of Uber (UBER) gained in early Thursday trading following positive commentary from analysts at Piper Sandler and Jefferies. The analysts’ notes came on the heels of two positive headlines for the company. New York City issued a revised wage proposal for app-based food delivery drivers, which should result in smaller cost headwinds for Uber. Bloomberg also reported that Uber may consider divesting its Freight segment. In this article, we will delve into the details of these developments and how they are impacting the ride-hailing company’s stock.
Piper Sandler Analysts Support Divesting Freight Segment
Piper Sandler analysts maintained an Overweight rating and $41 price target on Uber’s stock. The analysts believe that divesting Uber Freight would be a good idea. According to the analysts, there are some theoretical advantages to running a digital freight platform alongside Uber’s better-known Delivery and Mobility segments. However, they think that the Freight business makes more sense as a standalone entity. By spinning off Uber Freight, the company could focus on its core businesses and potentially unlock more value for shareholders.
Jefferies Analysts Positive on Revised Wage Proposal
Jefferies analysts told investors that the revised wage proposal in New York City should result in smaller cost headwinds for Uber. The proposal seeks to ensure that app-based food delivery drivers earn a minimum wage of $15 per hour after expenses. The analysts believe that Uber’s dominant scale and network effect support greater reinvestment into customer experience and adoption, which should spur frequency, stickiness, and grow share over time. Furthermore, the company’s multiple product offerings and geographic diversity expand its total addressable market (TAM), driving cross-sell opportunities and reducing macro risk.
Stock Performance and Future Outlook
Uber’s stock opened the session at $34.4 after Wednesday’s $34 per share close. It is currently trading at $34.17 at the time of writing. The positive commentary from Piper Sandler and Jefferies likely contributed to the slight uptick in the stock price. However, the stock is still down from its 52-week high of $64.05. Investors have been cautious about the company’s ability to turn a profit and compete with rivals like Lyft and DoorDash. However, the potential divestiture of the Freight segment and the revised wage proposal could be positive developments for the company.
Conclusion:
Uber has had a turbulent year, with the COVID-19 pandemic hitting its ride-hailing business hard. However, the company has pivoted towards food delivery and other transportation services to make up for the decline in ride-hailing revenue. The potential divestiture of the Freight segment and the revised wage proposal for app-based food delivery drivers could be positive developments for the company. Investors will be watching closely to see how these developments unfold and how they impact Uber’s financials and stock price.
