Why Analysts Could Be Wrong Upgrading Uber

After a disastrous post-IPO performance, analysts are warming up to Uber Technologies (NYSE:UBER). The quiet period ended, allowing 20 analysts to issue either ‘buy’ or ‘hold’ calls. Even though Uber keeps losing money, it is still a central leader in disrupting the taxi industry, eating services, and freight markets.

In the short-term, Uber stock will trade on sentiment shifts and on hope, so quarterly losses will not scare off investors. The TAM (total addressable market) is very large and Uber only has a portion of the market. As it expands to gain market share, the company still must minimize expense growth and start generating profits. And getting Wall Street support to prop UBER stock higher will limit the short-trade.

Snap (NYSE:SNAP) and Twitter (NYSE:TWTR) both reported sizable and growing losses when it first went public. Uber will do the same, with markets willing to speculate that profits will eventually come.

Investors overlooked the loss and focused instead on two figures: first-quarter gross bookings grew to $14.6 billion and monthly active platform consumers rose to 93 million. Expect platform adoption increasing even without the global expansion. Adjusted EBITDA and core platform contribution margin will remain in the negative as Uber invests in its operations.

Uber stock may potentially rally from here. Speculators will get rewarded so long as the momentum does not turn negative.