What Happened: Shares of ride sharing and on demand delivery service Uber (NYSE: NYSE:UBER) jumped 5.5% in the morning session after the S&P Dow Jones Indices announced that the company would join the index before the start of trading on Monday, December 18th, 2023. The S&P 500 is a widely followed index that tracks the performance of the 500 largest companies in the United States. Being included in the index means that Uber will likely be held by many mutual funds and ETFs, which could potentially drive up demand for the stock.
We note that while buying of the stock could increase, this development does not change the fundamentals of the company. Revenue growth, expense efficiency, and capital intensity of the business, for instance, are not impacted by index inclusion or exclusion, so this is more of a technical tailwind for the stock.
In response to the announcement, Oppenheimer analyst Jason Helfstein raised the stock's price target from $65 to $75, maintaining a Buy rating. This new target suggests a potential 24% upside from the stock's level when the upgrade was disclosed. Helfstein added, "Following the inclusion, we expect UBER to lean into growth and share buybacks, which should increase investor sentiment for growth/ return in 2024..." After the initial pop the shares cooled down to $60.02, up 4.6% from previous close.
Is now the time to buy Uber? Find out by reading the original article on StockStory.
What is the market telling us: Uber's shares are somewhat volatile and over the last year have had 9 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 7 months ago, when the stock gained 10.8% on the news that the company reported first-quarter results that surpassed analysts' revenue, free cash flow, and earnings per share estimates. Adjusted EBITDA also beat, and gross bookings was inline. In addition, gross bookings and adjusted EBITDA guidance came in above the Consensus estimates. Overall, it was a healthy quarter for the company, with an improved margin and cash position.
Uber is up 137% since the beginning of the year. Investors who bought $1,000 worth of Uber's shares at the IPO in May 2019 would now be looking at an investment worth $1,444.
