Uber (NYSE:UBER) can weather the coronavirus storm and any dip in Uber stock is a buying opportunity.
Granted, most of its business came to a screeching halt with the coronavirus. It saw a 60% decline in customers ordering rides across the U.S. with businesses closed, and most of us opting to stay at home. However, the stock is still being bid higher for two key reasons.
One, the CEO has assured investors it has enough cash to weather the storm. And two, its Uber Eats business is seeing a big boost as people stay home and order delivery.
While the UBER stock could see further coronavirus headwinds, it appears a good deal of fear was priced in. After plunging from $42 to a low of $13.71, I believe Uber could test prior resistance round $36 – just under its 50- and 200-day moving averages, near-term.
Uber CEO Still Optimistic
In an attempt to put concerns to bed, CEO Dara Khosrowshahi is optimistic. He noted the company has $10 billion in cash as of the end of February 2020.
Also, even in a worst-case scenario where the virus pulls down the ride business 80%, the company would still have $4 billion in cash at the end of the year. Plus, it would have access to a $2 billion “debt rollover.”
On that news, analysts are confident. Wells Fargo analyst Brian Fitzgerald, for example, upgraded the stock to Overweight from Equal Weight, yet still trimmed his price target to $41, from $45.
“We think Uber’s value remains tied to growth trends that will play out long after coronavirus-driven disruptions have subsided,” he writes, citing near-ubiquitous smartphone penetration in the U.S. and a continued shift to ride-sharing from personal car ownership.
The Bottom Line on Uber Stock
With many of us stuck at home, (some of us with kids driving us up the wall), food delivery services are still up and running.
As Investorplace contributor Luke Lango notes:
“The broad bull thesis on the food delivery segment is pretty simple. Consumers are stuck at home, restaurants are closed, but consumers still have to eat. So, they will increasingly turn towards food delivery services during this exceptionally unique time. Top executives at many of these food delivery companies have said that demand for their services has skyrocketed over the past few weeks.”
One of the companies benefiting is Uber Eats, “even in Seattle,” said Khosrowshahi. Just over the last week, Uber Eats saw a 10% increase in sales week over week. Plus, the service has seen a 30% jump in customers signing up for the program, as noted by Forbes’ contributor Marco Chiapetta.
While the jump in sales and customers may not be enough to offset the full blow of the coronavirus’ impact, it’s still great news. With a good amount of fear priced into the Uber stock, now may be the best time to buy. I strongly believe UBER stock could retest $42.
Ian Cooper, a contributor to InvestorPlace.com, has been analyzing stocks and options for web-based advisories since 1999. As of this writing, he did not hold a position in any of the aforementioned securities.
