Are you looking to hail a ride short or long in the market? If the investment is in Uber (NYSE:UBER) you may want to wait for the fight between the bulls and bears in Uber stock to end first.
Both rideshare operators Uber and Lyft (NASDAQ:LYFT) have had tumultuous rides in their IPOs. But Uber stock has suffered a little less.
As the second-to-market and with maybe the benefit of some insight into investor appetite, shares of UBER are down about 10% from its public offering at $45. But is this stock a short or a long right now? It depends on who you ask.
Investment shop Susquehanna weighed in yesterday with a bearish analyst note. The firm’s Sayim Patil cautioned UBER stock’s forecasted revenue growth is too optimistic. That’s not to say Uber won’t be the leader in the rideshare market. In fact, Patil acknowledged Uber is a “once in a generation company.”
The problem is as an investment, UBER stock is going nowhere. Susquehanna slapped shares with a neutral rating and modest price target of just $42 based on several quarters of slowing bookings, weaker sales growth and the company’s complex financial model, which combined, will act as likely drags on Uber’s valuation.
At the same time, analyst Dan Ives at Wedbush has been an early and prominent bull on UBER stock. He sees Uber as being transformational as in the spirit of an Apple (NASDAQ:AAPL) or Amazon (NASDAQ:AMZN). Ives’ initiated coverage of shares with an outperform rating and price target of $65 prior to Uber’s listing back in early May. That amounts to upside of around 60% over the next 12 months.
Wedbush’s upside thesis rests on Uber’s large network, currently low penetration rates in current markets, massive potential within roughly 700 cities worldwide and the food and freight business opportunities within the platform.
So who is to be believed? I see both analysts as raising good points. But on the UBER stock price chart, an equally compelling “point” to wait and see makes sense before investing long or short.
Uber Stock Price Chart
Click to Enlarge
The technical point I see being made on UBER stock’s price chart is a symmetrical triangle. The pattern has developed since Uber’s mid-May debut on the NYSE. This type of formation is typically associated as a continuation pattern of the prior trend.
In this instance and with no prior price history, the price consolidation in UBER stock is simply a neutral area where neither bulls nor bears have any discernible edge. If you’re persuaded by the bullish argument for Uber, my suggestion is to wait for a breakout of Uber’s triangle above $42.50.
Bottom-line, shares of Uber have been showing weakness. For the moment that should be respected as it could hint at a breakdown. And that could always lead to a much better opportunity down the road to pick up shares at prices where even bears might question their positions.
Disclosure: Investment accounts under Christopher Tyler’s management do not currently own positions in any securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional options-based strategies and related musings, follow Chris on Twitter @Options_CAT and StockTwits.
