Uber Technologies Inc.’s shares hit their highest prices in more than a year Friday, as Wall Street continued to celebrate the company’s big win in California as a sign that regulatory concerns about driver classification should ease elsewhere.
Proposition 22, which will exempt Uber
and other app-based gig companies from a California law that would have required them to treat their drivers as employees, “removes a major risk factor and clears investors to evaluate recovery scenarios,” Loop Capital analysts wrote.
“We consider the victory especially noteworthy because it demonstrates Uber’s leverage with government through popular opinion,” said Brian Fitzgerald, Wells Fargo analyst, in his note to investors.
Uber shares gained 6.9% to $44.87 after hitting a high of $45.38 Friday, the highest closing and intraday prices for Uber stock since June 2019, not long after the company’s May 2019 initial public offering. Shares already received a big boost after Tuesday’s election, as analysts’ regulatory and cost concerns turned to optimism.
Uber Chief Financial Officer Nelson Chai said on Thursday’s earnings call that the company expected increased costs of 5% related to the implementation of Proposition 22, which will include possible increases in wages and some new benefits for drivers, but the company will pass those costs on to consumers. Uber had warned of greater costs if the ballot initiative failed.
Beyond the regulatory issues, Uber’s third-quarter earnings report was mixed. Its red-hot delivery business is offsetting what RBC Capital Markets calls a “glacial recovery” by its rides business.
Uber Chief Executive Dara Khosrowshahi stressed the upside of delivery and said his company can only benefit from what he called a “fundamental behavior shift” in consumer habits.
“We believe the company is well positioned to take advantage of the increasing shift in consumer behavior coming out of the crisis, as the global leader in ride sharing, bolstered by its ability to cross leverage its platform services,” analysts at William Blair wrote.
Uber’s mobility revenue in the quarter fell 53% year over year to $1.37 billion, while its delivery business revenue was $1.45 billion, a 125% increase from the year-ago period. It posted a loss of a little over $1 billion, or 62 cents a share.
Of 26 Uber analysts tracked by FactSet, 21 have the equivalent of buy ratings on the stock, while three say hold and two call the stock a sell. The average price target on Friday was $41.80, according to FactSet, about 7% lower than the going rate.