Markets

Here's why Uber could break out in 2020, according to RBC Capital's Mahaney

Key Points
  • Uber is set up for a big 2020, argued RBC Capital Markets analyst Mark Mahaney. 
  • Mahaney compared Uber's positioning to where Facebook was last year when it rose 55%. 
  • "I think this stock could materially outperform," Mahaney said. 
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Uber could be the 'Facebook of 2020,' says RBC analyst

Uber's first year as a public company had some setbacks, but brighter days should be ahead in 2020, RBC Capital Markets analyst Mark Mahaney told CNBC on Friday.

"It's actually our No. 1 pick for the year," Mahaney said on "Power Lunch."

While Uber's stock is "clearly dislocated" and was "very controversial last year," Mahaney said he believes Uber is well positioned to narrow its losses and continue growth in its ride-hailing business.

If the company is able to do that, and demonstrate to investors that its pledge to achieve adjusted EBITDA profitability in 2021 is within reach, "I think this stock could materially outperform," Mahaney said.

"It could be the Facebook of 2020," he added, referencing the social media giant whose stock rose more than 55% in 2019.

"Facebook was really dislocated at the end of 2018 and fundamentals stayed very well intact," he said. "I think that's kind of the setup on Uber. I know the sentiment is negative."

But Mahaney said there are already signs Uber could deliver on the bull thesis, pointing to the San Francisco-based company's decision to sell its food delivery business in India.

More decisions like that should help shrink the company's losses, to which "the markets will respond really positively," Mahaney contended.

When Uber reported its quarterly earnings in November, it had losses of more than $1.1 billion. Its next earnings report is scheduled for Feb. 6.

Mahaney has a buy rating and $64 price target on the stock, which implies more than 70% upside from its current levels.

Shares of Uber on Friday closed down 1.6% to $36.80. But the stock is up more than 20% year to date.

Uber went public in May, ending down more than 7% on its first day of trading. The company priced its IPO at $45 per share.

It notched its 52-week high of $47.08 in late June but has since struggled to approach those levels. It bottomed at $25.58 on Nov. 6.

Another reason Mahaney remains bullish on Uber: ride-hailing as a service still has room to run.

"Our survey work found that it's only about 40% of U.S. internet users use ride-sharing," he said. "I think that penetration rate can double. ... This company could sustain 20% bookings growth in its core ride-sharing business for a lot longer than people realize."

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