🚘 Is Uber a buy?

Good morning Pros! In today’s issue, we’ll talk about Uber and highlight 5 top summer stocks according to Bank of America. In the end, we’ll share our Investment of the Week.

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📊 Stock analysis: Is Uber a buy?

We last covered Uber in 2024 when it was trading at $69 and gave it a $85 target, which the stock achieved last month. So, is it only going higher or is it time to put the breaks on? Let's find out:

The current situation:

• The stock is trading at $85.60.

• It has a 52-week high of $93.61 and a 52-week low of $54.83.

• The stock enjoys a P/E of 14.93.

It’s doing well

Uber’s stock has shown strong momentum, climbing 40.4% year-to-date, outperforming the S&P 500 and its closest rival, Lyft. This growth reflects Uber’s robust financial performance, with a record $6.9 billion in free cash flow and $6.5 billion in adjusted EBITDA in 2024.

The company’s diversified business model, spanning mobility, delivery, and freight, has driven consistent revenue growth, with Q1 2025 reporting $6.5 billion from mobility and $3.8 billion from delivery.

Strategic partnerships, such as the recent deal with Five Below to deliver from over 1,500 stores via Uber Eats, highlight Uber’s push into non-food retail, further strengthening its platform. However, the stock’s forward P/E ratio of 26.92X, compared to the industry’s 17.97X, suggests a premium valuation, raising questions about whether the price reflects its growth potential.

There are opportunities ahead

We see significant opportunities for Uber to sustain and expand its growth. The global ride-sharing market continues to expand, particularly in international markets, where Uber’s scale and network effects—boasting 170 million monthly active users and over 7 million drivers—provide a competitive edge.

The delivery segment, bolstered by Uber Eats, is capitalizing on the growing demand for convenience, with partnerships like Five Below enhancing its retail offerings.

The autonomous vehicle (AV) market, projected to grow from $0.4 billion in 2023 to $45.7 billion by 2030, represents a transformative opportunity.

Uber’s partnerships with AV leaders position it to integrate autonomous vehicles efficiently, potentially reducing driver-related costs and scaling services. Additionally, Uber’s $7 billion stock buyback program, including a $1.5 billion accelerated plan, signals confidence in long-term value creation.

But not without challenges

Despite its strengths, Uber faces notable challenges. Rising debt levels, with long-term debt reaching $8.3 billion by the end of 2024, up 45.6% since 2019, pose a financial risk.

Competitive pressures are intensifying, with Lyft and AV-focused companies like Waymo challenging Uber’s dominance. The potential for AV companies to develop their own demand aggregation apps could bypass Uber’s platform, threatening its role as the primary aggregator.

Regulatory risks also loom, as the ride-hailing industry remains vulnerable to stricter gig worker regulations, which could compress margins. Currency-related headwinds are expected to impact gross bookings in Q2 2025, and market saturation in urban areas may push Uber to focus on less penetrated suburban markets, requiring new strategies.

Autonomous Showdown: Tesla’s Challenge to Uber

The race for autonomous vehicle dominance is heating up, and Tesla is emerging as a formidable challenger to Uber’s ride-sharing empire. Tesla’s upcoming Cybercab launch in Austin, Texas, in June 2025, aims to disrupt the market with a scalable robotaxi service. With plans to deploy millions of self-driving vehicles, Tesla could drastically reduce ride costs by eliminating human drivers, leveraging its advanced Full Self-Driving (FSD) technology.

CEO Elon Musk’s vision of an Airbnb-style model, where Tesla owners can lease their vehicles as robotaxis, threatens to bypass Uber’s platform entirely by creating a competing demand aggregation network. However, we believe Uber holds a strong edge in this battle.

Its partnerships with Waymo and potential integration of Tesla’s Cybercab into its fleet allow Uber to leverage its unmatched scale—170 million users and 7 million drivers—without the massive R&D costs Tesla incurs.

Analysts, like RBC Capital’s Brad Erickson, argue Tesla’s disruption poses “very little risk” to Uber, as its established brand and operational infrastructure make it the preferred partner for AV providers.

For now, Uber’s network effects and strategic alliances give it the upper hand, but Tesla’s technological prowess could shift the balance if its robotaxi service scales successfully.

Where’s Uber headed?

Uber’s stock gains stem from its strong financial performance, diversified revenue streams, and strategic positioning in the AV space. The market rewards Uber’s ability to generate substantial free cash flow and its scalable platform, which continues to attract users, drivers, and merchants. However, periodic dips reflect concerns over its high valuation and rising debt, as well as uncertainties around AV adoption and competition.

Looking ahead, we expect Uber’s stock to maintain its upward trajectory if it successfully integrates AV technology and expands its delivery offerings.

Analysts project revenue growth of 14% annually over the next five years, driven by ride-sharing and delivery, with AVs potentially boosting trip volumes to 30 billion by 2034.

Is Uber a buy?

Uber is a strong company with significant long-term potential, but its high valuation (forward P/E of 26.92X vs. the industry’s 17.97X) and regulatory challenges may limit near-term upside.

We believe patient investors could find Uber a compelling long-term investment, particularly if autonomous vehicle integration and delivery expansion succeed. However, in the short term, we expect its performance to trail the S&P 500, offering modest returns without significantly outperforming the broader market this year. Despite this, Uber remains a solid investment for those with a long-term horizon.

📊 Analysis

Top Stock Picks for Summer 2025: Bank of America’s Buy Recommendations

Bank of America has identified five stocks with strong potential for growth, making them attractive buys as we head into summer 2025.

Here are the names:

Nvidia: Leading the AI Revolution

Bank of America maintains a Buy rating on Nvidia, naming it a top sector pick with a price objective of $180. The firm highlights Nvidia’s dominant position in the AI market, supported by its multi-year lead in performance, robust pipeline, and strong developer support.

Analyst commentary notes, “AI demand/visibility remain strong… we believe NVDA remains best positioned to benefit from the ongoing AI tide.” Nvidia’s scale and incumbency further solidify its growth potential in this rapidly expanding sector.

Philip Morris: Defensive Strength and Smoke-Free Growth

Philip Morris has emerged as a top performer in the U.S. market, driven by strong execution and improving profitability in its smoke-free products, such as ZYN and IQOS.

Bank of America recently raised its price target by $18 to $200, citing the company’s defensive nature and lack of exposure to China and tariff-related volatility.

The firm notes, “PM has been a top performer… led by execution, improving profitability in smoke-free, ZYN/IQOS volumes and continued contribution from combustibles to support SF growth.”

Boot Barn: Riding High on Broad-Based Growth

Boot Barn, a Western-themed footwear retailer, is experiencing broad-based growth across its merchandise categories and geographies.

Analyst Christopher Nardone raised the price target to $192 from $173, emphasizing the company’s multi-year growth potential. “We are encouraged that the acceleration in comp trends has been broad-based… With larger scale comes better pricing, better selection, more exclusive brands, and better customer service,” Nardone wrote. The stock, up 8% this year, is well-positioned for further share gains in a favorable pricing environment.

Amazon: Robotics and E-Commerce Dominance

Amazon’s stock has risen over 15% in the past 12 months, and Bank of America sees more upside, raising its price target to $248 from $230.

Analyst Justin Post highlights the company’s use of robotics and drones to reduce labor dependency, increase order accuracy, and improve warehouse efficiency. “Robotics could increase AMZN’s competitive moats,” Post noted, adding that Amazon is well-positioned to capitalize on global e-commerce growth, cloud computing, online advertising, and connected devices.

Netflix: Streaming Powerhouse with Advertising Upside

Netflix has surged 39% in 2025, driven by sustained earnings momentum and positive subscriber trends. Analyst Jessica Reif Ehrlich raised her price target to $1,490 from $1,175, citing the company’s unmatched scale in streaming and opportunities in advertising and live sports.

“We continue to view Netflix as well positioned given… further runway for subscriber growth, significant opportunities in advertising and sports/live and continued earnings and [free cash flow] growth,” she wrote. The firm sees Netflix as a defensive play amid tariff-related market rotations.

📰 Investment of the Week: Oracle

Oracle (ORCL) is our investment pick, currently trading at $174.02 with a market cap of $464.18 billion.

Ahead of its Q4 2025 earnings on June 11, Oracle anticipates 8-10% revenue growth ($15.54B consensus) and $1.61-$1.65 EPS.

Historically, ORCL gains 0.1% in the two weeks pre-earnings but has a mixed post-earnings record, dropping 7 of 12 times (median -4.4%) despite a slight average 1-day gain of 0.5%.

Strong cloud demand and AI initiatives, bolstered by partnerships with Google and Microsoft, drive long-term growth, with $130B in remaining performance obligations. However, capacity constraints and a premium valuation (P/B 27.73X vs. industry 8.89X) pose risks.

ORCL has risen 15.8% YTD but lags some peers like AMZN (+2.72%) and GOOG (+3.01%). This earning can be a significant because positive news can send it up 4% but a bad report could cause it to go down about 8%.

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