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Investing.com -- Stifel initiated coverage on Uber (NYSE:UBER) with a Buy rating and a $110 price target saying that company is evolving into a super app that combines ride-hailing, food delivery, grocery delivery, and advertising under one platform.
Stifel also started coverage at DoorDash (NASDAQ:DASH) and expressed caution over valuation despite strong execution.
Stifel believes Uber is well-positioned to meet or exceed its 2024-2026 financial targets, which include mid-to-high teens gross bookings growth and 90%-plus EBITDA-to-free cash flow conversion.
Uber has executed well since setting its targets, analysts wrote, pointing to 2024’s 21% gross bookings growth and 106% FCF conversion.
The firm expects continued expansion into non-urban areas and rising adoption of Uber One to drive sustained growth.
Stifel also sees upside in Uber’s low advertising penetration, estimating it at just 0.9% of gross bookings.
If that rises to 2.5% without any bookings growth, it could add over $1 billion in incremental annual revenue, the analysts said.
On DoorDash, Stifel assigned a $198 target and noted strong operational execution, particularly with international expansion following the acquisitions of Wolt and Deliveroo (OTC:DROOF).
The firm said it remains bullish on DoorDash’s growing advertising business, which it believes could scale significantly from its current ~0.2% of marketplace GOV.
Still, the analysts said shares appear fairly valued, with limited near-term upside after a strong run.
“Despite these positives, we believe shares are fairly valued at the moment, but would look to become more positive on a pullback,” analyst at Stifel said.
Stifel also flagged competitive pressure, particularly from Uber Eats’ partnership with Instacart (NASDAQ:CART), which could erode DoorDash’s leading market share in restaurant delivery.
Despite different ratings, Stifel sees long-term opportunities in advertising and consolidation for both platforms as the delivery sector matures.