Raymond James Reinstates Uber Coverage with Strong Buy Rating, Shares Rise

Raymond James has reinitiated coverage of Uber Technologies with a Strong Buy rating and a price target of $90, emphasizing the company’s robust position in the emerging autonomous rideshare sector.

In premarket trading on Tuesday, Uber shares saw a 1% increase.

As highlighted in the report, Uber’s strategic partnerships, particularly with Waymo, are pivotal to its “Robo-Ride” vision, which anticipates a significant role for autonomous vehicles (AVs) in the company’s future operations. The firm believes that, unlike other competitors such as Tesla, which faces challenges in scaling and ensuring the safety of their Full Self-Driving technology, Uber is in a favorable position thanks to its size and strategic alliances.

Analysts at Raymond James express strong optimism regarding Uber’s collaboration with Waymo. They argue that this partnership is essential for optimizing the usage of autonomous vehicles. Given Uber’s extensive user base—over 150 million monthly active platform users—this partnership has the potential to enhance Waymo’s ride volume significantly.

The report notes that while Waymo currently estimates around four hours of daily vehicle utilization, the demand from Uber could increase this to eight hours, leading to an approximate 20% improvement in operating margins.

Additionally, the analysis points out that autonomous robotaxis could greatly enhance Uber’s unit economics, potentially increasing contribution margins by more than 50%.

Uber’s core business is also performing admirably, with non-UberX trips doubling and Uber One delivery bookings experiencing substantial growth.

Raymond James anticipates a 1-2% revenue boost from Uber’s involvement in Waymo’s autonomous service expansion, suggesting that Uber’s third-party demand could enhance utilization across various areas of the utilization sine curve.

The firm maintains a positive outlook for Uber’s bookings and EBITDA for 2025, taking into account the beneficial effects of Waymo and a less pronounced impact from Tesla’s robotaxi projects.

In a broader perspective, ride-sharing is expected to comprise approximately 1% of total U.S. lightweight vehicle miles traveled by 2025. Despite a decline in these miles during the 2007-2008 period, factors like an increasing driver supply, a return to workplaces, and cost reductions from robotaxis could help alleviate similar effects in the future.