Popular ride-hailing services provider Uber Technologies, Inc. (UBER) also provides delivery and freight services. In addition, it is making advances in the self-driving technology space and urban air transport. In an 8-K filing filed on September 21, the company mentions that its gross bookings are expected to be between $22.80 billion and $23.20 billion in the third quarter. Also, CFO Nelson Chai said, “With positive Adjusted EBITDA in July and August, we believe Uber is now tracking towards Adjusted EBITDA breakeven in Q3, well ahead of our prior guidance.”

The stock has gained 16.1% over the past month to close yesterday’s trading session at $47.25. However, it has lost 8.7% over the past three months and 13.6% over the past six months. According to a Brodmin report, the global gig economy is expected to reach $455 billion in 2023. However, UBER faces increasing regulatory pressure to reclassify its contractor drivers as employees. So, the stock’s near-term prospects look uncertain.

Here are the factors that could shape UBER’s performance in the upcoming months:

Strategic Partnerships

Bartell Drugs announced a new partnership with UBER on September 24 to deliver its products through Uber Eats. On September 21, GetSwift Technologies Limited partnered with UBER to integrate and offer a suite of best-in-class products and services. UBER also announced an exclusive partnership with FTD, LLC in July 2021, representing its first national floral partnership. In the same month, UBER and Costco Wholesale Corporation (COST) entered a delivery pilot whereby COST members could have their groceries delivered within hours, if not minutes.

Impressive Financials

UBER’s gross bookings came in at an all-time high of $21.90 billion in the second quarter ended June 30, 2021, representing a 114.2% year-over-year rise. The company’s revenue increased 105.4% year-over-year to $3.93 billion. Its loss from operations decreased 26.1% year-over-year to $1.19 billion. Its net income came in at $1.14 billion in the quarter compared to a net loss of $1.78 billion in the year-ago period. Its EPS came in at $0.58 compared to a loss per share of $1.02 in the prior year’s quarter.

Increasing Regulations

Companies such as UBER and Lyft, Inc. (LYFT) received a severe blow as California Superior Court Judge Frank Roesch recently ruled that Proposition 22 is ‘unconstitutional.’ Moreover, on September 13, an Amsterdam district court ruled in favor of the Federation of Dutch Trade Unions that UBER’s drivers are to be treated as employees and not contractors. Also, the company announced on September 24 that it would start rolling out its pension plan to all eligible drivers in the United Kingdom, following the reclassification of more than 70,000 of its drivers in Britain as workers complying with a Supreme Court ruling.

Stretched Valuation

In terms of forward EV/Sales, UBER’s 5.87x is 210.6% higher than the industry average of 1.89x. Likewise, the stock’s forward P/S of 5.47x is 259.9% higher than the industry average of 1.52x. Moreover, its forward P/B and P/CF of 6.14x and 462.37x are higher than the industry averages of 3.18x and 14.84x, respectively.

POWR Ratings Reflect Uncertainty

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

Our proprietary rating system also evaluates each stock based on eight different categories. UBER has a C grade for Growth, consistent with analysts’ expectations that its EPS will remain negative in fiscal 2021 and 2022.

The stock has a C grade for Value, in sync with its higher-than-industry valuation ratios. UBER has a C grade for Stability as well, consistent with its beta of 1.53.

Moreover, it has a C grade for Quality. This is justified as UBER’s trailing-12-month ROCE, ROTC, and ROTA are negative compared to the industry averages of 12.40%, 6.35%, and 4.76%, respectively.

UBER is ranked #42 out of 72 stocks in the Technology – Services industry. Click here to see UBER’s ratings for Momentum and Sentiment as well.

Bottom Line

UBER’s shares have soared 20.6% since raising guidance on September 21. However, analysts expect its EPS to decline 178.9% next year and remain negative in fiscal 2021 and 2022. As a result, it looks significantly overvalued at the current price level. Therefore, it could be wise to wait before scooping up its shares.

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

While UBER has an overall POWR Rating of C, you could check out Fujitsu Limited (FJTSY) and NetScout Systems, Inc. (NTCT), which are rated A (Strong Buy) in the same industry.

UBER shares were trading at $46.19 per share on Tuesday morning, down $1.06 (-2.24%). Year-to-date, UBER has declined -9.43%, versus a 17.59% rise in the benchmark S&P 500 index during the same period.

Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst.

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