Proactive Investors - Uber Technologies Inc (NYSE:UBER, ETR:UT8) has earned a price target raise from Jefferies analysts who believe the company’s expanded Mobility product suite is a meaningful tailwind for growth.
They wrote in a note to clients that Uber has “dramatically” expanded its Mobility offerings from just two products in 2022, UberX and Black, to about 20 currently.
Addressing additional use cases allows the ride-share company to capture new users and drive increased frequency by multi-product adoption, they believe.
“The strategy is working, with bookings from new mobility products (or New Bets) increasing from $2.3B in fiscal 2021 to $8.5B in fiscal 2023, which represents 90% annual growth and now comprises 12% of Mobility bookings (6% in 2021),” they wrote.
“Key new offerings include Reserve, Taxis, 2/3 wheelers, and XShare, which each generate over $1 billion in bookings (annual recurring revenue).”
They forecast New Bets will see a 45% bookings compound annual growth rate over the next three years, contributing one-third or 4% per year of Uber’s total Mobility growth.
They estimate nearly 70% of growth in New Bets will be from a combination of Reserve and Taxi, two of Uber’s highest margin offerings.
Additionally, the New Bets will boost earnings before interest, taxes, depreciation and amortization (EBITDA) growth, the analysts believe.
They predict New Mobility Bets will contribute one-fourth or 6% per year of segment growth through to fiscal 2026.
“Our analysis assumes EBITDA margin across New Bets expands from 2.9% in fiscal 2023 to 5.5% in fiscal 2026, driven by greater contributions to growth from Reserve/Taxi and improved margins across each product as scale builds and incentives moderate (especially in Taxi),” they wrote.
“We expect increased adoption of Uber for Business will help funnel users to higher-margin products, with over 40% of corporate travel on Uber happening on premium offerings like Reserve/Comfort/Black.”
Based on their thesis, the analysts reiterated their ‘Buy’ rating on Uber and raised their price target on the stock from $95 to $100.
“We raise our fiscal 2025 bookings/EBITDA [estimates] by 1%/2% to reflect tailwinds from New Mobility Bets, which moves our estimates to 2%/5% above consensus,” they wrote.
Shares of Uber traded 4.1% higher on the upgrade at about $78 in the early afternoon on Friday.