BofA Securities analyst Justin Post maintained Uber Technologies Inc
The re-rating reflects a slightly higher 3.5x Mobility P/S multiple (vs. 3.0x prior), given improving margin expectations, ad growth, and global share gains.
The analyst noted that Uber outperformed the NASDAQ in 2023 by nearly 80pts (up 120% vs. 43%) and outperformed peers.
Multiple expansion fueled upside, with forward EV/Sales up from 1.3x to 2.8x today.
Looking forward, Post noted Uber as offering one of the best 3-5 years growth profiles in the Internet sector, with potential for mid-to-high teen bookings growth and 30% EBITDA growth as margins increase from 3.5% of bookings toward 7%.
Margin progress has been a top theme for the stock, and with solid driver supply and advertising traction, Post noted an opportunity for another year of incremental margins above the long-term target of 7% (Street at 8% incremental EBITDA margin on bookings).
While the bar gets tougher as Uber laps the introduction of high-margin ads, the analyst noted strong driver supply, a stable competitive environment, and new advertising services (and partners) as contributing to margin expansion in 2024.
Post's top items for the 4Q call and investor day included any annual bookings, EBITDA guidance, the outlook for a minimum level of incremental margins, capital returns, given improved cash flows, new product offerings, ad services, subscription features, and insurance renewal expectations.
The analyst projects fourth-quarter revenue of $9.81 billion (versus consensus of $9.84 billion) and first-quarter revenue of $10.04 billion (versus consensus of $9.99 billion).
Post expects bookings and EBITDA for the fourth quarter at $37.2 billion and $1.24 billion vs. Street at $37.1 billion and $1.22 billion, with a slight upside driven by Mobility.
The analyst is above Street for the first quarter and expects bookings and EBITDA outlook at $37.5 billion - $38.5 billion and $1.26 billion - $1.31 billion vs. Street at $37.2 billion and $1.25 billion.
Price Action: Uber shares traded lower by 0.64% to $66.55 on the last check Tuesday.
