Uber Technologies (UBER) carries CFRA's highest investment ranking of 5-STARS, or Strong Buy, notes a leading CFRA Research analyst Angelo Zino in the firm's advisory service, The Outlook.
Our STARS change to Strong Buy from Buy on February 19 reflects our high conviction about the trajectory of the rides haring market through 2021 and better visibility towards adjusted EBITDA profitability.
We think price cooperation in ridesharing and less aggressive incentives will support segment growth/margin expansion, while we expect losses from Uber Eats to improve in the second half of the year and into 2021.
At the end of 2019, Uber's platform was available to a massive scale of more than 900 cities and 69 countries. Ridesharing services, currently in early phases, will witness significant growth potential over the next 20-30 years, by our analysis.
The ride hailing space has been among the fastest-growing mobility services over the last decade, creating a new mode of transportation (defined as Mobility as-a-Service or MaaS), while disrupting the taxi and rental car industries.
The key factors that will drive the growth of the global ridesharing service industry include a growing population, a lower rate of car ownership among millennials, the rising trend of on demand transportation services, and a growing supply of drivers.
We estimate revenue will increase 27% in 2020 and 23% in 2021, after a 26% increase in 2019. We anticipate robust demand for UBER's ridesharing platform through 2021, reflecting the rising adoption of UBER's services in existing regions as well as the expansion into new cities, primarily outside the U.S.
We see UBER's rewards program driving loyalty/greater consumer frequency, while the company also benefits from greater price cooperation in ridesharing.
While we think mass adoption of autonomous vehicles remains years away, we forecast players within the Transportation as a Service arena, like Uber, will be among the first adopters and beneficiaries of the technology. Our 12-month target of $48 is based on our DCF analysis.
