Uber's New York City taxi deal moves it closer to being a transportation 'super app,' analysts say

Published Wed, Mar 30 202210:14 AM EDTUpdated Wed, Mar 30 202210:58 AM EDT

Uber 's deal with New York City taxis solves short-term driver shortages while moving the company one step closer to becoming a transportation super app, according to investors and analysts. The ride-hailing company last week announced an agreement to list all New York City taxis on its app. And it's close to securing a similar partnership with San Francisco's taxis , The New York Times reported. Uber did not respond to CNBC's request for comment on the report. The New York City deal marks a significant reversal for Uber, which has faced opposition from taxi companies since its founding in 2009. "This is a smart move from Uber management to strike this kind of agreement, particularly when both sides have limited [driver] supply," MKM Partners Rohit Kulkarni said. "As time progresses, being the single source of all kinds of local mobility options becomes that much of a bigger strategic moat for Uber." Investors have so far cheered the deal, bidding the stock up 12.5% in the past four trading days since Uber's announcement. Uber's share price is coming off a 52-week low notched on March 8. The stock is still down more than 11% this year, underperforming the S & P 500's 2.8% decline in 2022. Driver supply Uber, Lyft and other ride-hailing companies have been dealing with a shortage of drivers after the Covid pandemic disrupted travel. Surging gas prices aren't helping. Analysts say Uber's deal with New York City taxis should help alleviate those near-term labor issues. "In the short term, it solves a problem for the consumer," said Jason Helfstein, head of internet research at Oppenheimer. The New York City Taxi and Limousine Commission said yellow cabs generated $1.4 billion in fares in 2019. Uber doesn't break down its fares by region, however, it logged $90 billion in gross bookings in 2021. Ride-hailing apps on average made more than 554,000 trips per day in February, while yellow taxis made 106,000, according to New York City Taxi and Limo Commission data. Regulatory sentiment Given Uber's contentious history with local municipalities and taxi groups, analysts say the deal boosts the company's regulatory standing. "Most notably, we think the move signals a more constructive relationship with key regulators," said Evercore analyst Mark Mahaney in a research note. Uber's move to partner with taxis could also pave the way for other ride-hailing companies, according to analysts. "Uber has definitely created an opening for others to follow," Kulkarni said. "I wouldn't be surprised if three to six months down the road, Lyft is able to convince other taxi groups to start listing cars on their platform." Super app Investors and analysts also highlighted Uber's leadership advantage as the sector consolidates. "Capital is drying up, which is ultimately good for them. This is a positive inflection point in their business," Jason Tauber, portfolio manager at Neuberger Berman, told CNBC's "TechCheck" on Friday. "This is not a business that can sustain many players." Uber's taxi deal is indicative of the company's goal of becoming a super app for consumers' transportation needs, he added. The company already has food and grocery delivery segments. "Bringing taxis onto their platform, it's not really going to move the needle that much, but it's important in this narrative about them creating a super app for transportation," Tauber said. For Oppenheimer's Helfstein, who also covers Lyft and food delivery service DoorDash , there's no question which company is most likely to take the crown. "Uber is right now in the best position to be a super app," Helfstein said.

An Uber vehicle is viewed in Manhattan in New York City.

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Uber's deal with New York City taxis solves short-term driver shortages while moving the company one step closer to becoming a transportation super app, according to investors and analysts.