I Was Confused...Now I'm Thinking Of Going Long On Uber

In May of 2018, Uber made it IPO debut with shares priced at $44 to $50, given the company an immediate $80 or $90 billion market cap. However, since Uber went public, the stock has declined more than 30% due to concerns of competition and profitability. Case in point, Uber reported operating losses of $3.03 billion last year and gave no timeline for turning a profit.

To make matters worsts, the former CEO, Travis Kalanick of the ride-hailing company has sold off over 90% of his stake, nearly 90 million shares, since November 6.

A couple of months ago, Analyst Scott Devitt said that Uber was turning the corner, with signs of sustainable improvements in the fundamentals. He added that the current valuation offers a more reasonable entry point for interested investors. In addition, Barclays’ analyst Ross Sandler said that Uber was one major announcement away from a positive narrative change heading into the New Year.

Shares of Uber Technologies (UBER) - Get Report gained on Tuesday after the company was named Morgan Stanley’s top U.S. internet stock pick for 2020, and as it announced the sale of Uber Eats in India to rival Zomato in a $172 million deal.

Uber was up more than 3% at $36.37 in morning trading on Tuesday after Morgan Stanley named it the top U.S. internet pick for the year, and predicted a 57% rally in the ride-hailing giant’s stock on improving profitability and the potential for additional growth in ride-sharing services.

The firm has a $55 price target on Uber’s stock, among the more bullish on Wall Street.

So was this the turning point Scott Devitt was talking about? Was this the one good headline that Ross Sandler was talking about? Uber sold Uber Eats in India to local rival Zomato in a $172 million deal to cut back from operations that still isn't profitable. Will Uber's effort in off loading unprofitable business help Uber closer to its goal of being profitable on an Ebitda basis by 2021? Wall Street as a whole thinks so. Wall Street analysts have a consensus price target of $44.46 with 28 "buy" ratings, 12 "hold" ratings, and zero "sell" ratings, according to Bloomberg data.

The last time Uber reported their earnings, which was in November, the company said, if you exclude certain non-operating expenses...mainly interest, depreciation, and stock-based compensation, the company earned a $631 million profit, enough to cover the company's core operating expenses, the company said. But that the theoretical profits were pulled down by the losses such as Uber Eats.

From my perspective, Uber can't do no wrong at present time because the sentiment has turned around. To mean the news is so bad that it's actually good. For example, Uber' stock price is up 26% year to date. Price also took out the weekly supply at $34.

At this point, the chart is suggesting price can climb to the $44 level.

This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.