Uber Caught ‘Flat Footed’ by London Ban But Analysts Are Unfazed

(Bloomberg) -- Uber Technologies Inc. shares slumped on Monday after the ride-hailing company lost its license to operate in London when the city’s transport regulator said it failed to address safety concerns.

Wedbush analysts said Uber was caught “flat footed” by the London decision. “The horror show of bad news since its IPO continues for Uber,” analysts Ygal Arounian and Daniel Ives wrote. But, overall, Wall Street analysts weren’t overly concerned, especially because Uber is able to appeal the decision.

Uber shares briefly dropped as much as 4%, but bounced back to trade down 1.4% at around 11:30 a.m. Eastern time.

Wedbush, Ygal Arounian and Daniel Ives

(Outperform, PT $45)

• Said Uber was caught “flat footed” by the London decision
• If Uber is ultimately not able to operate in London, it will be a “seismic blow” to the company’s European operations
• London is the company’s biggest city in Europe with 3.5 million riders and 45,000 licensed drivers
• The analysts expect the stock to be under pressure as the Street digests the news, which could have a major ripple impact across other European cities in light of the London decision
• The string of bad news since the IPO is masking underlying fundamentals that are continuing to improve with profitability now expected in 2021

Citi

(Buy, PT $45)

• The news comes as a surprise as it suggests a tougher regulatory backdrop in London than previously thought
• London accounts for an estimated 4% to 5% of Uber Rides gross bookings, and 3% to 4% of total company gross bookings
• Expects some pressure on shares, but doesn’t view the news as thesis-changing, given the history of regulatory issues in London and the opportunity for Uber to resolve outstanding issues through an appeals process

Evercore ISI, Benjamin Black

(Outperform, PT $60)

• “This decision certainly poses narrative risk going forward, particularly as it pertains to Uber’s ability to hit its 2021 profitability targets”
• Uber’s ability to integrate its facial recognition software should be sufficient to win a renewal, and could put Uber at a competitive advantage versus emerging competition in the city, such as from Bolt and Kapten
• “Disrupting Uber service in London is unlikely to be a popular decision,” and Mayor Sadiq Khan’s re-election could be hurt

Loop Capital, Jeffrey Kauffman

(Buy, PT $41)

• Because of the improvements that Uber has made on its technology platform and passenger safety processes, expects Uber to appeal this decision and continue to operate as normal during that process
• “In the long run, we expect that Uber will be operating in London, although we cannot rule out the possibility of periods of uncertainty as these regulatory challenges present themselves”

To contact the reporter on this story: Esha Dey in New York at edey@bloomberg.net

To contact the editors responsible for this story: Brad Olesen at bolesen3@bloomberg.net, Scott Schnipper

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