Deutsche Bank’s Lloyd Walmsley, sees meaningful upside potential to Uber (NYSE: UBER)’s shares with its recovery poised to happen on the 3rd and 4th quarters of 2021, driven by their optimism for strong demand for rideshare in anticipation for the 2nd half’s Covid vaccine spread, the improving profitability at the delivery segment, as well as a better sense for long-term margins in food delivery. “One of the best attributes of the food delivery business is that subscribers join and use it but they use it more and more frequently,” said Lloyd in an interview with CNBC.
The general thesis is that, if the world gets better, rides take-off but if the world gets worse, Uber Eats will show further strength. “Clearly a rideshare recovery is what we want to see for the stock and part of that is that even if food delivery will have tough competition and could benefit from longer lockdowns, we think the business is stickier than what people think,” he marked while saying that people already got used to ordering food and that these applications will continue to be used when restrictions will be lifted.
According to Lloyd, when rideshare comes back, the company will benefit from better gross bookings, better financial profile and also benefit from the fact that people on Uber can use their rewards points on the food delivery side. “You get the frequency back in the rideshare business. It also actually has a benefit on the food delivery business. So that’s definitely the case that is the best for the stock.”
Lloyd Walmsley concluded the interview by saying, “The other thing that people are missing is just how profitable the food delivery business can become.”.