Uber Technologies Inc. (NYSE: $UBER) is a transportation company that operates a mobile app where users can hail rides for which drivers charge fares. Since it was founded in 2009 in San Francisco, CA, its service has spread to over 70 countries in hundreds of cities globally.
Uber Announces First-Ever Share Buyback
On Wednesday, February 14, 2024, Uber announced its first-ever share buyback program of $7 billion. The announcement comes amidst Uber’s resilience in overcoming pandemic headwinds, emerging in its strongest financial position since its founding.
With the news, Uber’s stock price spiked 11.68%, reflecting investor optimism about Uber’s future. According to Prashanth Mahendra-Rajah, Uber’s CFO, the buyback underscores Uber’s commitment to delivering shareholder value while capitalizing on its profitability turnaround.
“We’ll start by offsetting stock-based compensation and steadily reduce share count,” noted Mahendra-Rajah.
Uber’s Upbeat Multiyear Forecast
Uber forecasts robust growth over the next three years. The company projects mid to high teen percentage increases in gross bookings annually, alongside 30-40% adjusted annual core profit growth. Moreover, Uber anticipates a free cash flow of above 90% for the next three years.
Thomas Hayes of Great Hill Capital praised Uber’s move as proof of its operational excellence and surging demand. “Uber is hitting on all cylinders and has decided it’s time to return capital back to the owners. It’s a vote of confidence in demand for their services as well as operational discipline perfectly executed by CEO Dara Khosrowshahi,” remarked Hayes.
The buyback, which could reduce Uber’s share count by up to 5%, has garnered widespread investor approval. It signals Uber’s optimism regarding its future while underscoring its shareholder value commitment.
Uber Stock Price Reaches New Highs
The buyback news powered Uber stock to new heights, reaching $77.05 on February 14, an 11.68% jump from the previous close of $68.99. Over the past year, Uber’s share price has skyrocketed 90.42% compared to 19.42% for the S&P 500 index.
The stock is now close to its 52-week peak and above its 50-day and 200-day moving averages. With 2.06 billion outstanding shares, Uber has a market capitalization of $158.033 billion.
Positive Outlook for UBER Stock
Wall Street analysts have a strongly bullish outlook on Uber stock. Price targets range from a low of $62 to a high of $90. The consensus forecast calls for solid gains, with the average target implying a 2.49% upside from the current level of $76.74.
Uber is poised to release its Q1 2024 earnings on March 1, and analysts predict strong results, estimating EPS of $0.21 compared to -$0.08 last year. Uber’s guidance forecasts gross bookings between $37-38.5 billion and EBITDA of $1.3 billion.
Final Thoughts
Uber’s $7 billion share buyback program demonstrates its confidence amidst an impressive profitability turnaround. Uber has decisively emerged as a resilient industry leader geared for long-term success. With Uber’s current success and upbeat multi-year forecast, adding Uber to your portfolio would be wise.
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