Uber's ad growth potential is just like Amazon's: Analyst

Piper Sandler has raised its price target on Uber (UBER) from $86 to $88, calling the rideshare company a "sleeping giant" in its latest note.

Piper Sandler Senior Research Analyst Tom Champion joins Catalysts to give insight to his call and why he is bullish on Uber.

Champion claims that his excitement for Uber comes from its potential to grow in using advertising to target users like Amazon (AMZN) has done previously:

"I think the way to frame this is we've seen, over the last 6 or 8 years, Amazon build this gigantic advertising juggernaut. And a lot of this is done through sponsored listings. The ability of Amazon merchants to advertise and promote their goods. And we believe that in all transaction platforms, there exists this promotional advertising opportunity in the gig economy space... with Uber's scale, which really kind of dwarfs the rest of the space, the future looks very interesting."

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This post was written by Nicholas Jacobino

Video transcript

Uber getting a bullish call from Piper Sandler, the firm reiterating its overweight rating on the stock raising its price target from 86 bucks a share to $88 saying the Uber scale makes it a quote sleeping giant.

Let's talk about it.

The analyst behind this call, Tom champion joining us now, Tom, it's great to talk to you.

So I guess break down this view of why you see Uber as a sleeping giant relative to many of its peers within the space.

Hey, good morning.

Thanks for having me on.

Yeah, we dug into the topic because earlier this month, Lyft talked about its longer term ad revenue and bookings targets and we received a lot of questions from clients on, you know, the uh uh the the likelihood the Lyft would be able to achieve those.

And so we, we wanted to dig into the topic holistically for the for the gig economy group overall.

So that this would be the bucket that includes Uber, doordash, Lyft and, and Instacart.

And through that analysis, we came away, impressed with Instacart existing opportunity in uh in advertising, they have AAA very well developed uh ads business at, at this point with a very high attached rate on on bookings.

But the sheer scale of Uber was, was quite compelling and led us to think that, you know, really in the context of this advertising opportunity, uh U Uber is the name to watch.

Ok.

So Tom, I just want to take a big step back and walk our viewers through exactly what we're talking about here.

So when you talk about Uber having opportunities, I know they just opened up journey ads.

For example, you're talking about advertisers being able to target Uber riders through the Uber app after bookings.

Is that correct?

Yeah, that's correct.

Or um uh via the, the Uber Eats platform uh as as well or in, in increasingly in the future uh on, on the grocery side, that's an vent area of uh their business as well.

But I think the, the, the way to frame this is we've seen over the last uh you know, six or eight years uh Amazon build this gigantic advertising juggernaut.

And um a lot of this is done through um sponsored listings, the ability of Amazon merchants to, to advertise and promote their goods.

And we, we believe that in all transaction platforms, there exists this promotional advertising opportunity.

Um you know, in, in the gig economy space Instacart is the one that has um uh developed this, this part of the business uh most um to this point.

But um with, with Uber scale, which, which really kind of dwarfs the rest of the space.

Um the future looks looks very interesting.

So John, when you take into account, I guess how much of a jump or how much growth we could see in the ad revenue and what that opportunity looks like for a name like Uber versus a name like Instacart leaders within the space versus some of the other smaller players when it comes to the gig economy, I guess putting that in context for, for our viewers, how confident you are that Uber is gonna be able to capitalize on this opportunity and then more specifically how big of a driver catalyst you see this being for Uber stock.

Sure.

Um So what I, what I would say is that I, I believe management in their comments um are uh over time revealing the playbook here and what, what they are attempting to, to build and with many of these uh transaction business models or, or gig economy business models um unit profitability is, is sometimes challenged.

These are not overly um profitable consumer internet models, but advertising is a great model.

And so over time to the extent that these businesses can evolve or develop their, their advertising business, I believe that this can prove quite accretive to uh to margins.

And then again, I I would just highlight that um we believe there's a $5 billion advertising revenue opportunity for Uber by 2027.

Um, and if they're able to hit that II, I think there's going to be upside to, uh, consensus he to die expectations, which are about 13 billion to that.