Why Uber Stock Is Volatile After GM's Cruise Announcement
Uber stock is swinging this week following news that General Motors is restructuring its Cruise unit. Here's what you need to know.
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Uber Technologies (UBER) stock plunged nearly 6% Wednesday after General Motors (GM) announced it is exiting Cruise robotaxi development in order to refocus the unit on advancing its autonomous and assisted driving capabilities, but shares are almost 2% higher today. Uber and Cruise had formed a partnership earlier this year that would have brought Cruise vehicles to the ride-hailing firm's platform.
"In many ways this announcement highlights the economic challenges of scaling a robotaxi network and the role rideshare platforms can play as autonomous vehicles attempt to commercialize (a bullish indicator), but we think the more tangible impact right now is on the partnership ecosystem given Waymo is already scaling despite the costs and Tesla (TSLA) has ambitions to do so as well," wrote Bernstein analyst Daniel Röska in a December 10 note.
While Tesla can be seen as a direct threat to Uber in the robotaxi arena, Uber and Waymo are collaborating in cities like Phoenix, Austin and Atlanta, where Uber manages the fleet and operations of Waymo vehicles, including maintenance and charging.
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However, Waymo does not use Uber in other cities like San Francisco and recently announced its expansion to Miami in partnership with Moove.
"The plan is the next phase of Waymo's experimentation with various business models before committing to a long-term strategy," wrote Jefferies analyst John Colantuoni in a December 6 note.
Regarding Tesla, Uber remains optimistic about a potential robotaxi partnership. Uber CEO Dara Khosrowshahi told the Financial Times in October that he would "love" to have Tesla's Cybercab robotaxi on the Uber platform, according to Teslarati. But even if that doesn't happen, "I don't think this is going to be a winner-take-all marketplace," Khosrowshahi said. "We believe in the spirit of partnership; we'll see what Tesla does."
Is Uber Technologies stock a buy, sell or hold?
Uber Technologies has struggled on the price charts this year and is up just 1.5% since the start of 2024. Still, Wall Street is bullish on the large-cap stock.
According to S&P Global Market Intelligence, the average analyst target price for UBER stock is $90.05, representing implied upside of 45% to current levels. Additionally, the consensus recommendation is Buy.
Financial services firm Jefferies is one of the more bullish outfits on UBER stock with a Buy rating and $100 price target. Colantuoni said the firm remains bullish on Uber due to its leading free cash flow growth and growing stock buybacks, among other reasons.
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