Zacks Equity Research has issued a neutral rating for Uber Technologies (NYSE: UBER), setting a 6–12 month price target at $82, up from its last trading price of $73.42 (as of November 25, 2024). While Uber continues to see strong performance in its Mobility and Delivery segments, challenges such as high operating expenses and debt levels remain key concerns. The company’s gross bookings forecast for Q4 2024 is between $42.75 billion and $44.25 billion, with adjusted EBITDA estimated at $1.78 billion to $1.88 billion. Investors are advised to closely evaluate Uber’s growth potential and its financial risks.

Financial Highlights: Strengths and Opportunities

Robust Growth in Delivery and Mobility:

The Delivery segment revenue grew 18% year-over-year (YoY) in Q3 2024, reaching $3.47 billion, driven by increased trip volumes and advertising revenue. Gross bookings in this segment rose by 16% YoY to $18.6 billion.
The Mobility segment, which contributed 57.2% of Uber’s total revenue, saw a 26% YoY increase to $6.41 billion in Q3, supported by post-pandemic recovery and higher trip volumes. Gross bookings for Mobility surged 17% YoY to $21 billion.
Freight Segment Showing Resilience: Freight revenue rose 2% YoY to $1.31 billion, benefiting from stronger revenue per load despite headwinds in the broader logistics market.

Guidance for Q4 2024:

Gross Bookings: $42.75–$44.25 billion, indicating 16–20% YoY growth.
Adjusted EBITDA: $1.78–$1.88 billion, representing a YoY increase of 39–47%.

Operational Efficiency and Financial Challenges

Cost Management Progress: Adjusted EBITDA in Q3 2024 surged 55% YoY to $1.69 billion, surpassing Uber's guidance range. This reflects improved operational efficiency amid growing demand for its services.

High Debt Levels: Uber’s long-term debt rose to $10.98 billion in Q3 2024, compared to $9.45 billion in the prior quarter. Its cash and cash equivalents totaled $6.15 billion, signaling potential liquidity challenges.

Rising Expenses: Increased sales, marketing costs, and high cost of revenues continue to weigh on the company’s profitability.

Growth Catalysts and Strategic Partnerships

Delivery Business Momentum: Consumer appetite for online food orders remains robust, providing sustained growth opportunities for Uber’s Delivery segment. The company’s advertising initiatives contributed to this segment’s top-line performance.

Strategic Collaborations: Uber is capitalizing on partnerships to enhance its offerings.

A partnership with Darden Restaurants will see Uber Direct power on-demand delivery for Olive Garden across the U.S. by mid-2025.
Collaboration with Avride, an autonomous vehicle company, positions Uber for growth in robotaxi services and innovative food delivery solutions.
Technological Advancements: Recent leadership appointments, such as Rebecca Tinucci as Global Head of Sustainability, underscore Uber’s commitment to a zero-emission platform by 2040.

Stock Valuation and Market Performance

Current Price Trends: Uber’s stock price has climbed 19.3% year-to-date, outperforming the broader Internet Services industry, which has gained 17.3%.

Valuation Metrics:

P/E Ratio (TTM): 36.5, compared to the industry average of 20.2.
Forward P/E Ratio: 38.9, indicating strong investor confidence in Uber’s growth potential.
Price-to-Sales Ratio: 3.7, reflecting moderate valuation in the tech sector.
Long-Term Growth Potential: With a Zacks Growth Score of A, Uber is well-positioned for expansion across its core segments, although rising competition and financial constraints warrant caution.

Risks and Challenges

Debt Burden: Uber’s significant debt and limited liquidity could impact its ability to fund future investments or navigate economic downturns.

Volatile Stock Performance: With a beta of 1.34, Uber’s stock exhibits higher volatility than the broader market, making it less suitable for risk-averse investors.

Labor Unrest: Frequent driver protests over wages could disrupt operations and add to costs.

Actionable Insights for Investors

Target Price and Upside Potential: With a Zacks price target of $82, the stock offers an 11.7% upside from its last traded price of $73.42.
Entry Point: Investors are encouraged to wait for a better entry point given the stock’s current overvaluation relative to its fair value.
Focus on Fundamentals: Long-term investors should monitor Uber’s debt management and progress in achieving sustained profitability.