Is Uber (NYSE:UBER) stock a buy after the ride-hailing company’s latest earnings?
Uber reported fourth-quarter numbers on Feb. 9, and they contained some encouraging results. The company announced net income of $892 million and earnings per share of 44 cents, which beat Wall Street forecasts of a 35-cent loss per share.
Revenue came in at $5.78 billion versus $5.34 billion expected, according to Refinitiv data. Equally encouraging, the company said it is quickly putting the omicron variant of Covid-19 in its rearview mirror and that its business is on track for a strong 2022.
With Uber stock down 40% over the past year, including a 15% decline so far this year, to just more than $35, now might be an opportune time for investors to take a position in the San Francisco-based pioneer of ride sharing.
Moving Beyond The Pandemic
Uber’s business suffered more than most during the worldwide pandemic of the past two years. With people locked down and afraid to share rides with strangers, its business model was thrown into crisis.
In 2020 during the pandemic’s peak, Uber’s net loss for the year amounted to $6.77 billion. However, the company looks to have weathered the storm and is emerging on the other side of Covid-19 as its various business units grow and expand.
For the fourth quarter of 2021, revenue from the company’s rides business totaled $11.3 billion, up 67% from a year ago, while revenues from its food delivery business reached $13.4 billion, up 34% from the same quarter a year ago.
The company’s Uber Eats food delivery business held up particularly well. The company said its number of delivery merchants worldwide is now approaching 1 million. However, Uber’s ride sharing and taxi unit is showing improvement, having reported 1.77 billion trips on the platform during the fourth quarter, up 8% from the previous quarter and 23% from 2020.
Monthly active platform users reached 118 million, also up 8% in the fourth quarter. Notably, airport rides represented 13% of Uber’s gross bookings in the fourth quarter, up 24% from the third quarter and up nearly 200% from the same period a year ago as people begin to travel again.
Looking ahead, Uber forecasts that its first quarter gross bookings will amount to $25 billion to $26 billion, and it anticipates adjusted earnings of $100 million to $130 million. All in all, Uber’s business is doing much better today than even six months ago, and it should strengthen further as we progress through this year.
Lingering Issues
Uber stock initially got a nice bounce after its Q4 release, with the share price rising 5%. However, the next day, the stock fell 8% after the company held its annual Investor Day conference and disappointed Wall Street analysts who were in attendance.
The main concern was that the company forecast that its adjusted earnings will reach $5 billion by 2024, which was a little below the $5.7 billion that analysts had expected. There are also concerns about the impact high inflation and rising interest rates around the world will have on Uber’s global operations. Growth stocks such as Uber are out of favor with the prospect of higher interest rates looming on the horizon.
Additionally, Uber continues to face legal challenges to its “gig economy” business model in jurisdictions around the world. Last year, Britain’s Supreme Court ruled that a group of Uber drivers are entitled to worker rights such as minimum wage pay, a precedent setting decision that could impact the ride-hailing service in other countries, including the U.S.
The company waged several court battles in New York and California over worker’s rights and other issues in recent years. These challenges to Uber treating its driver’s as self-employed people threatens its entire business model and financial structure and shows no signs of going away anytime soon.
Yet despite these issues, most analysts are currently bullish on Uber stock, especially after its latest earnings report. Mizuho Securities is among the most bullish, having placed a $72 price target on the shares, implying 95% upside. Bank of America recently raised its price target on Uber to $55 from $53 previously, for upside of 45%.
Among 40 professional analysts, the median price target on Uber’s share price is currently $65, which would be nearly 80% higher than its current level.
Start With A Small Position In Uber Stock
While not without risk, Uber’s shares look attractive after being beaten down 40% in the past 12 months, and as the company’s financials show that the business is successfully emerging from the pandemic.
After two difficult years, Uber looks to be back on track and firmly in control. The legal challenges to its business model remain a concern, and any further surprises related to Covid-19 could send the company into another financial tailspin.
But investors who feel confident that the worst of the pandemic is behind us should consider taking a small position in Uber and see where the share price goes this year. Uber stock is a buy.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
