- Bernstein cut its price target on Uber (NYSE:UBER) to $35 per share today
- This move brought ride-hailing stocks significantly lower
- However, Uber stock still provides great upside relative to Bernstein’s price target
The widespread nature of today’s dismal price action is notable. Across the entire market, there are few spots of green. For ride-hailing stocks such as Lyft (NASDAQ:LYFT) and Uber (NYSE:UBER), it has been a rough day. LYFT stock closed down 17%, while UBER stock dropped more than 9%.
These moves lower appear to be the result of widespread, market-based concern. Recession fears are building as consumer-facing companies face margin pressures. Surging inflation, and the rising rates intended to battle inflation, provide a poor setup for equity investors right now.
However, beyond the dismal macroeconomic backdrop, these ride-hailing companies have their own headwinds. For UBER stock in particular, today’s decline is directly tied to a key analyst price target cut.
Bernstein analyst Nikhil Devnani, who took over coverage of Uber with an “outperform” rating, also assigned a price target of $35 per share. That’s very bullish, relative to yesterday’s closing price of $23.78. However, this price target represents a 22% cut to the firm’s previous $45 price target.
Let’s dive into why analysts and investors are growing concerned with ride-hailing stocks right now.
Bernstein Spooks Investors in UBER Stock
It seems that Bernstein is pretty favorable on UBER stock in general. However, Devnani does cite a few issues like driver supply that will pose challenges to the company. Both Uber and Lyft have already struggled with driver shortages in 2022 and higher gas prices.
Importantly though, Bernstein sees “significant long-term potential” and its price target still implies more than 60% upside.
It’s clear that the market doesn’t agree with existing models and current multiples. Analysts are being forced to cut price targets, even on the companies they’re most bullish on. In this sort of “sell the rally” market, it’s tough to take a bullish stance on any risk asset these days.
I’m still digesting whether a 9%-17% downside move in a sector based on a price target cut, which still implies more than 60% upside, makes sense. But hey, that’s the market we’re in right now.
On the date of publication, Chris MacDonald 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.
