Uber stock could jump 28% as economy reopens, but overshooting regulation is risk, says Wedbush

• Uber stock could jump 28% amid the economic reopening, Wedbush says.
• Analyst Dan Ives reiterated his “outperformance” rating for Uber, but lowered his price target to $ 66.
• Ives said “regulatory overshoot” was a concern after the Biden administration’s decision to block a Trump-era rule affecting construction workers.
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Uber stock could jump 28% amid rising demand as the economy continues to reopen, but “regulatory overhang” is a growing risk, according to Wedbush.

In a note to clients Thursday, Wedbush’s chief equity research director Dan Ives said Uber “was showing signs of a major recovery.”

The analyst reiterated his rating of “outperformance” but lowered his target price to $ 66 per share against $ 76, citing a “regulatory overshoot”.

The price target of $ 66 represents a potential 28% rise in the share price from Wednesday’s closing price of $ 51.18 per share.

Ives said Uber’s gross bookings and EBITDA stood out in the company’s first quarter earnings report on Wednesday.

Gross bookings jumped 24% to a record high of $ 19.5 billion in the quarter from a consensus analyst estimate of $ 18.07 billion.

The overall increase in bookings came despite a 38% year-over-year drop in mobility bookings due to the pandemic.

Uber was able to improve its performance thanks to its delivery business which recorded a 166% increase in bookings.

While restaurant delivery revenue is likely to fall as the economy continues to reopen, Ives said the increase in mobility and out-of-restaurant delivery revenue will more than make up for the loss.

Adjusted EBITDA losses also improved by $ 95 million in the first quarter, reinforcing Uber’s claims that it will achieve profitability in the second half.

Despite Uber’s good quarter, the stock is under pressure after the Biden administration announced it would end a Trump-era independent contractor rule affecting construction workers.

“By removing the independent contractor rule, we will help preserve essential workers’ rights and stop the erosion of worker protections that would have occurred had the rule come into effect,” the secretary said. Labor, Marty Walsh, in a statement. by Reuters.

“Too often, workers lose important wage and related protections when employers mistakenly classify them as independent contractors,” Walsh added.

In his note to clients, Ives of Wedbush called the regulatory environment “the elephant in the room” and a “potentially troubling scenario / overhang for the bulls.”

He noted that Uber charged $ 600 million to its expenses in the March quarter based on the recent relocation of its drivers to the UK.

The analyst said this highlights the “complex and costly nature of these workforce changes.”

“In a nutshell, we remain bullish on Uber and believe this is a basic trade-in name to own for next year, as ridesharing rebounds and delivery business finds a rate of. Growth normalized. That said, we believe the regulatory overshoot is now $ 10 + overhang on the stock as the street better captures the workforce changes coming from the Biden White House, “concluded Ives.