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Uber will struggle to make profits in its core business, at least in the short term, said Dan Ives, an badyst at Wedbush Securities Thursday. In preparing the cover before this month's IPO, Ives said Uber will have to stand out from competing rail-hailing services like Lyft in order to satisfy investors.
The profitability of Uber's standard driving service will be "a difficult battle for Everest," said Ives, whose firm has awarded the company an "outperformance" with a target price of $ 65 per action. Instead, he said that Uber 's growth would come from other companies such as its Uber Eats food delivery service and its Uber Freight shipping platform.
Uber, which is expected to go public later this month, offers 180 million shares at a price of between $ 44 and $ 50. On a fully diluted basis, its valuation could exceed $ 91.5 billion, making it the largest public call for savings since Alibaba. Lyft debuted on Wall Sreet at the end of last month, gaining about 8% on the day of its IPO. But since then, Lyft's shares as of Tuesday were about 18% lower than their $ 72 bid price.
Ives said that Uber had established himself as the "clearest # 1 player" in the rides, adding that his main driving service was worth about $ 75 billion. He expects the service to generate profits within 5 to 7 years. "What you're really trying to do is put a narrower fence around your yard in terms of Uber versus a Lyft," he said in an interview for "Squawk Box". However, he added that investors want to know if Uber goes beyond strolls and becomes "the Amazon of transport" by encouraging consumers to use its other services.
Like Amazon, Uber is proud to diversify its activities beyond its main driving service for which it is best known. According to a New York Times report, Uber is compared to Amazon during its pre-IPO roadshow to justify its losses as it expands. For years, Amazon has reinvested all the money it has earned in the business, under the promise of future success, which has happened to the e-commerce giant.
Tom White, senior research badyst at D.A. Davidson, "resists" the story that Uber may be the next Amazon. In a CNBC interview with Ives on Wednesday, White said he saw no opportunity for significant diversification in the transportation and retail sectors.
"With Amazon, it was clear from the start that buying online was a much better customer experience," said White, who started the cover with a "neutral" rating on Uber and a price target of 53 $ per share.
– Lauren Feiner of CNBC contributed to this report.
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