Investing.com - This year will be "critical" for Uber (NYSE: UBER ), according to analysts at Bernstein, as the ride-hailing giant pushes to attract more customers and persuade investors that it can bolster its competitiveness in the race to monetize self-driving technology.
Earlier this year, CEO Dara Khosrowshahi touted Uber’s position in the self-driving taxi segment, arguing that the company can attract new technology partners thanks in part to this business.
Last month, Alphabet-backed Waymo launched its self-driving taxi in Austin, Texas using Uber’s platform exclusively.
Writing in a note to clients, the Bernstein analysts led by Nikhil Devnani said that data points from Waymo’s operations in Austin -- along with an upcoming release in Atlanta, Georgia -- will likely prove to be a major catalyst for Uber in 2025.
"[T]hese markets are now critical case studies for Uber to prove out the value of its network, which comes back to the strength of the existing audience it has, regulatory relationships, the ability to help Waymo manage a fleet, and the more mundane operations and support functions at scale," the analysts wrote.
At the same time, Uber needs to continue to show that it has "regained a bit more control" over the narrative around its autonomous vehicle (AV) operations, they said.
"The stock has rebounded from its 2024 lows, and the narrative has improved a bit. Nonetheless, there still is a bear case to disprove and a persistent overhang on the multiple from the AV debate," the analysts said.
"Even if we stick with a view that UBER is likely capped as a trading stock until the AV debate settles, there’s room to move up the range. To truly break out and regain investor comfort around the 5-year view, we need resolution on the core AV debates."
Shares in Uber have risen by more than 12% so far this year, and have slipped by over 4% in the past one-year period.
Meanwhile, the broader economic picture presents a "growing risk" for Uber, particularly if travel demand begins to soften, the analysts warned.
Recent data points have suggested that U.S. consumer inflation expectations have risen due to the potential impact of President Donald Trump’s sweeping -- and now-delayed -- tariffs.
The latest University of Michigan consumer survey in March showed that long-run inflation expectations were above 4% "in light of frequent developments and changes with economic policy."
Last month, consumer sentiment plunged as well, prior to the full unveiling of Trump’s punishing levies on countries around the world on April 2, as Americans fretted over their personal finances, business conditions, and unemployment.
The figures suggested that Americans were becoming more cautious and may be reining in spending on nonessential items. Fears have subsequently risen around a potential recession in the broader economy, although the latest numbers have not indicated that the U.S. is already in a downturn.
U.S. consumer prices increased by less than anticipated in March on annualized basis, and fell month-on-month.
"Against the current consumer backdrop, it may simply be good enough for Uber to hit Street numbers," the analysts said. They added, if Uber can deliver compound core income growth at 30% over the next two years, then an enterprise value-to-underlying earnings ratio of 14 "offers an attractive entry point in our view."