Analysts Sanguine On Uber Despite (Growing) Red Ink

Come on in, the water’s fine.

That red ink? Never mind.

It’s no secret that ride-hailing firms have had a rough go of it on Wall Street, with busted IPO status. At a recent $42, Uber shares are trading, still, below their initial offer price of $45. The company, as has been well reported, posted its first quarter as a publicly traded company with $1 billion in losses.

And yet, depending on where you look, the enthusiasm for the stock – at least from one group – has been overwhelming. That group is comprised of Uber’s underwriters, and as Reuters reports, those companies have held buy ratings on the stock – even as they’ve ratcheted up expectations for losses through the remainder of the year.

The clamor comes as the quiet period ends, and more than a dozen investment banks have come out in force with buy ratings, save a lone neutral from Citi, as estimated by Reuters.

In one example, Bank of America Analyst Justin Post wrote a note with a buy rating that stated “Uber is a transformational company that should benefit from secular shifts to the sharing economy (rides), time saving services (eats), and more efficient marketplace evolution (freight).”

Separately, Deutsche Analyst Lloyd Walmsley, also with a “buy” rating, wrote that “we see Uber as the most attractive internet IPO since Facebook, and believe that concerns related to Uber’s profitability outlook pose less risk than Facebook’s transition to mobile at that time.”

The positive notes come even as the underwriters, en masse, now see Uber losing $6 billion this year, and that is higher than the roughly $4.4 billion they had seen the company losing before the quarterly results were announced.

Analysts, by and large, are sanguine on the company’s ability to scale into new areas, with a platform model that may be reminiscent of Amazon’s own progress.

One casualty of the wholesale analyst embrace of Uber is Lyft, which of course is a ride-hailing competitor. Bloomberg reports at least some analysts have stated they preferred Uber to Lyft, and the latter has a more mixed sentiment along the Street. At least nine analysts are also covering the firm after a quiet period.

In one example, BTIG Analyst Walter Piecyk said both firms can become profitable on their core businesses, but added that “we believe the reason investors should own these stocks over the long term will be the role both can play in an autonomous future. We prefer Uber over Lyft primarily because of the scale of their operations, but also because of Uber’s willingness to leverage their platform across multiple use cases, all of which we expect to benefit from autonomy.”