Stifel sees ‘super app’ potential for Uber, cautious on DoorDash valuation

Stifel initiated coverage on Uber with a Buy rating and a $110 price target, citing its evolution into a super app and strong execution against financial targets, including 21% gross bookings growth and 106% free cash flow conversion in 2024. The firm also sees upside in Uber's advertising penetration. Stifel initiated coverage on DoorDash with a $198 target, noting strong operational execution and advertising potential, but believes the shares are fairly valued currently and flagged competitive pressures from Uber Eats' partnership with Instacart.

Analysis

Stifel has initiated coverage on Uber (UBER) with a 'Buy' rating and a $110 price target, highlighting the company's transformation into a comprehensive 'super app' integrating ride-hailing, food delivery, grocery services, and advertising. Stifel expresses confidence in Uber's ability to meet or surpass its 2024-2026 financial objectives, which include mid-to-high teens percentage growth in gross bookings and over 90% EBITDA-to-free cash flow conversion. This optimism is supported by Uber's strong recent performance, evidenced by 21% gross bookings growth and 106% free cash flow conversion in 2024. Key growth drivers identified are continued expansion into non-urban markets and increasing adoption of Uber One subscriptions. Furthermore, Stifel identifies a significant opportunity in Uber's nascent advertising business, currently at only 0.9% of gross bookings, estimating that an increase to 2.5% could generate over $1 billion in additional annual revenue. Concurrently, Stifel initiated coverage on DoorDash (DASH) with a $198 price target, acknowledging its robust operational execution, particularly in international markets following acquisitions like Wolt, and its promising advertising segment, which stands at approximately 0.2% of marketplace Gross Order Value. However, Stifel views DoorDash shares as fairly valued at present, suggesting limited near-term upside after a significant rally, and advises caution. Competitive headwinds, notably from the Uber Eats partnership with Instacart (CART), are also cited as a potential risk to DoorDash's leading market share in restaurant delivery. Despite differing ratings, Stifel sees long-term growth opportunities for both platforms through advertising expansion and sector consolidation as the delivery market matures.

Key Decisions for Investors

• For Uber (UBER), Stifel's 'Buy' rating, $110 price target, strong 2024 performance metrics including 21% gross bookings growth and 106% free cash flow conversion, alongside significant untapped advertising revenue potential, suggest a positive investment case.
• Investors considering DoorDash (DASH) should note Stifel's $198 target and assessment of fair valuation, implying limited immediate upside; it may be prudent to monitor for a potential price pullback before initiating new positions and to closely track competitive developments, especially the Uber Eats-Instacart alliance.
• The substantial growth potential in advertising revenue for both Uber and DoorDash, coupled with ongoing consolidation trends in the delivery sector, are critical long-term themes for investors to monitor within this space.