Needham dubs Uber shares its top pick despite a big Q3 loss

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on Nov 1, 2022
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  • Uber Technologies Inc reports a significant loss for its fiscal third quarter.
  • Needham analyst Bernie McTernan still recommends buying Uber shares.
  • The stock is currently down close to 35% versus the start of the year 2022.

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Uber Technologies Inc (NYSE: UBER), on Tuesday, reported to have ended its fiscal third quarter with a significant loss. Shares are still up more than 15% this morning.

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Why are Uber shares up that much?

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Investors refrained from punishing the ride-hailing company primarily for its upbeat guidance.

For Q4, Uber expects $30 billion to $31 billion in gross bookings versus analysts at $29.6 billion. Its forecast for adjusted EBITDA stands at $600 million to $630 million – also well ahead of $568 million that experts had anticipated.

Uber shares could climb into the $50s

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That outlook was enough for Needham’s Bernie McTernan to dub Uber shares his top pick. On CNBC’s “TechCheck”, he said:

The reason why Uber is our top pick right now in this space is because of the focus on profitable growth. And today was a great example of that. Despite the miss on bookings, they beat on adjusted EBITDA.

McTernan recommends buying Uber shares also because he’s convinced the mobility company will come through on its commitment to $5.0 billion of adjusted EBITDA in 2024. A multiple of 20 – 25 on that should see the stock trading in the $50s – over 70% up from here, he added.

Uber Technologies ended the quarter with a record number of drivers worldwide, which the Needham analyst says is sustainable.

Our mobility tracker is showing pricing and wait times declining. Our demand checks show demand continues to increase towards record levels. That tells us supply is increasing. As recession fears grow, it could help their supply constraints.

Including the price action this morning, Uber shares are still down nearly 35% for the year.

Notable figures in Uber’s Q3 earnings report

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  • Lost $1.20 billion versus the year-ago $2.40 billion
  • Per-share loss came down from $1.28 to 61 cents
  • Adjusted EBITDA was $516 million this quarter
  • Revenue jumped 72% year-on-year to $8.34 billion
  • Consensus was $456 million on $8.11 billion revenue
  • Adjusted EBITDA margin climbed to an all-time high
  • Ended the quarter with $4.9 billion in cash and equivalents

Overall gross bookings went up 26% to $29.1 billion this quarter but fell a bit shy of $29.6 billion that experts had forecast, as per the earnings press release.

Uber generated $358 million in free cash flow in the third quarter. Last month, we reported the U.S. Department of Labour to have proposed a new rule that could disable Uber from classifying its drivers as independent contractors.

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