Proactive Investors - Companies in the food delivery sector like Uber Technologies Inc (NYSE:UBER) and DoorDash Inc (NYSE:DASH) are positioned to outperform that market in 2023, according to analysts at Oppenheimer.
The firm has a $45 price target on Uber and a $70 target on DoorDash. The companies traded at $29.93 and $56.50 on Friday morning, respectively.
“We believe there are positive dynamics at play in 2023 for the mobility and food delivery sectors, despite investor worries about slowing consumer spending,” analysts said. “...We believe UBER/DASH shares will outperform the broader market in 2023 if EBITDA is in line with current Street expectations, even if there is top-line pressure from weaker consumer spending.”
Oppenheimer cited “improving driver supply and the positive effects it should have on mobility pricing and consumer demand; upside to mobility take rates from upfront driver fare quotes and dynamic pricing; and market share among the major food delivery companies.”
A lack of driver supply has been a headwind, but Oppenheimer analysts argued that lower fares should offset slower consumer spending. Case in point, the US has seen transportation prices pull back 8% since a June high.
Changes at Uber could help, too.
“With the roll-out of upfront driver pricing in July, Uber has been transitioning to programmatic pricing vs. traditional time/distance,” analysts said. “With drivers able to decline/accept a trip knowing the destination (and likelihood of a return trip) they are revealing the ‘true’ fare value, allowing Uber to dynamically price the fare to improve take rates.”
In terms of market share, DoorDash gained share while Uber remained flat. This tracks, the firm noted, arguing that Uber is more focused on hitting EBITDA, while DoorDash prioritizes growth.