Uber Technologies (UBER) plans to offload stakes in non-strategic assets. Reuters reports that the company could sell its stake in Chinese ride-hailing company Didi Global (DIDI). UBER shares rose 4.28% to close at $37.26 on December 14.
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Uber is a transportation networking company that offers ride-hailing services. It also operates a food order and delivery business.
Non-Strategic Stakes
Chief Executive Officer Dara Khosrowshahi has already confirmed that China is a pretty difficult environment in which to operate, adding that its stake in Didi is non-strategic. This year, Didi has come under immense regulatory pressure, resulting in the share price sliding about 53% from the IPO price.
Due to the intense regulatory pressure, the Chinese ride-hailing company has already confirmed plans to delist from the U.S. stock exchange and pursue a Hong Kong listing. The divestment of the Didi stake should allow Uber to unlock some value. (See Top Smart Score Stocks on TipRanks)
The U.S. ride-hailing giant held about $13.1 billion in investments in other companies as of the end of the third quarter. Didi accounted for about $4.1 billion. Uber also holds stakes in Indian food delivery company Zomato and its rival Grab.
Amid the sell-off drive, Uber will hold onto some companies for strategic reasons. The CEO has confirmed they are not in any rush to sell, given that some stakes could be monetized with time.
In the recent past, investors have raised concerns over Uber holding on to certain investments, which they believe indicates that the company considers those investments more attractive than freeing up capital to grow the core business.
Stock Rating
Last week, BTIG analyst Jake Fuller reiterated a Buy rating on Uber with an $80 price target, implying 114.71% upside potential to current levels.
Consensus among analysts is a Strong Buy based on 19 Buys and 1 Hold. The average Uber price target of $69.75 implies 87.20% upside potential to current levels.
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