Uber Technologies, Inc. (UBER) is the developer and operator of proprietary technology applications. The company enables consumers to connect with independent ride services providers for ridesharing services and with restaurants and food delivery service providers for meal preparation and delivery services.

Recently, UBER announced its plan to wind down its Uber Rewards Loyalty Program as the company is expected to shift its focus toward another loyalty program, the Uber One membership program. Uber One comes with an annual fee that offers free shipping alongside other benefits.

The membership program is expected to be a key strategy to attract new customers, cross-sell additional services on the Uber platform, and ultimately move them to become members by signing up for Uber One.

However, UBER’s stock is down 33.7% year-to-date and 14.1% over the past six months. It reached a 52-week low of $19.90 on June 30. However, it has recovered 35.9% since then to close its last trading session at $27.81.

Here are the factors that could affect UBER’s performance in the near term:

Mixed Financials

For the fiscal second quarter ended June 30, UBER’s revenue increased 105.5% year-over-year to $8.07 billion. Adjusted EBITDA rose 171.5% from the prior-year quarter to $364 million. However, net income attributable to UBER and net income per share attributable to UBER common stockholders came in at a negative $2.60 billion and a negative $1.33, down 327.4% and 329.3% from the same period the prior year.

Stretched Valuations

In terms of its forward EV/EBITDA, UBER is trading at 39.39x, 257.7% higher than the industry average of 11.01x. The stock’s forward Price/Book multiple of 7.57 is 189.9% higher than the industry average of $2.61. In terms of its forward Price/Cash Flow, it is trading at 55.26x, 315.1% higher than the industry average of 13.31x.

Mixed Analysts Expectations

The consensus revenue estimates for the quarters ending September and December 2022 of $8.15 billion and $8.63 billion indicate 68.2% and 49.4% year-over-year increases. Street revenue estimate for the fiscal year 2022 of $31.25 billion reflects an improvement of 79% from the prior year.

However, the consensus EPS estimate of a negative $4.63 for fiscal 2022 indicates a 1,681.5% year-over-year decrease. Moreover, its EPS is expected to come in at a negative $0.17 for fiscal 2023.

POWR Ratings Don’t Indicate Enough Upside

UBER has an overall rating of C, which equates to Neutral in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

UBER has a Momentum grade of C in sync as the stock is trading above its 50-Day Moving Average of $25.02 but below its 200-Day Moving Average of $32.26.

The stock has a C grade for Quality. This is justified by its trailing-12-month gross profit margin of 33.72%, 15.5% higher than the industry average of 29.19%, while its trailing-12-month ROE of a negative 96.58% is significantly lower than the industry average of 14.51%.

In the 82-stock Technology – Services industry, it is ranked #56. The industry is rated D.

Click here to see the additional POWR Ratings for UBER (Growth, Value, Stability, and Sentiment).

View all the top stocks in the Technology – Services industry here.

Bottom Line

The Uber One membership program’s recurring revenue is expected to provide greater consistency and predictability. Although UBER’s top line is expected to witness stable growth, its bottom line is expected to remain in the red. Moreover, given its negative ROE, I think it might be wise to wait for a better entry point in the stock.

How Does Uber Technologies, Inc. (UBER) Stack Up Against its Peers?

While UBER has an overall POWR Rating of C, one might consider looking at its industry peers, Celestica Inc. (CLS) and Jabil Inc. (JBL), which have an overall A (Strong Buy) rating, and ScanSource, Inc. (SCSC) and Leidos Holdings, Inc. (LDOS), which have an overall B (Buy) rating.

UBER shares were trading at $28.89 per share on Wednesday afternoon, up $1.08 (+3.88%). Year-to-date, UBER has declined -31.10%, versus a -12.08% rise in the benchmark S&P 500 index during the same period.

Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.

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