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Uber Technologies Inc [NYSE:UBER] has been underperforming for quite some time now, largely due to the COVID-19 pandemic. At the moment, the company is trading below its IPO price of $45, and from its pre-market price action, it is set to open the week lower than Friday’s close. So what next for Uber?
Should investors expect even more pain in the near-term, or a bounce back to profitability? From a look at Uber’s internal dynamics and market-wide factors, there is a high probability of this stock rebounding in the foreseeable future. Some of the factors likely to play into this stock’s momentum are as follows:
A post-COVID-19 normalization
One of the factors that have led to a drop in Uber’s value is the drop in mobility due to the COVID-19 pandemic. With many countries and U.S States in and out of lockdowns, overall movement of people has slowed down. However, this is unlikely to be the case long-term.
The world is slowly opening up again and customers for Uber are likely to return. The big break would be the discovery of a vaccine. This would see the world return to pre-pandemic economic activity. With multiple biotech companies and billions of dollars spent on research, there is a high chance of a breakthrough in 2020 or early 2021.
If it materializes, a company like Uber that already has dominance in the ride sharing economy, could see its value rise as the economy peaks up again. This makes Uber highly undervalued when considering that it is trading way below its IPO price.
Uber is taking strategic value protection steps
Uber is currently looking to protect its share value by divesting from some of its international holdings. Late last week, the company announced that it was seeking to sell its stake in Chinese ride sharing company.
The company noted that its CEO was in talks with a group of investors that include Japan’s Softbank for the sale of the company’s 15% in Didi. The company is also considering divesting from its holdings in Southeast Asia and Russia.
Uber is doing this to offset cash burn in some of its investments such as food delivery. This is likely to support the stock’s growth potential in the near-term, when the pandemic is still keeping the markets volatile at the moment.
About Uber Technologies Inc
Uber Technologies Inc makes and operates proprietary technologies that are used all over the world. It is based in San Francisco, California.
