Goldman Sachs says Uber’s business model is one of its biggest risks (UBER)

  • But they think its business model is a key risk in and of itself

Uber is facing an existential threat: Uber .

That’s what Goldman Sachs analysts said in a report out that Tuesday that initiated coverage of the ride-hailing behemoth and its much-smaller and newly public rival, Lyft . The research came as the quiet period following Uber’s initial public offeringended.

According to the bank, one of the key risks to Uber as an investment is its “business model,” as some markets don’t allow ride-hailing.

The regulation of ride-hailing companies in different markets around the world is a major concern, Goldman Sachs said. Japan, South Korea, Germany, Argentina, Spain, and Italy still do not allow Uber to operate its traditional rides business, the firm noted. Labor costs and how Uber can ultimately reach profitability are other concerns, too.

“Uber’s business could be negatively impacted should any regulatory authority take issue with its operating model, consumer protections, and/or autonomous vehicle development/deployment,” the analysts led by Heath Terry wrote.

Despite what the firm sees as a pretty fundamental risk, Terry and his colleagues are bullish nonetheless. Along with the majority of their Wall Street peers, they slapped a “buy” recommendation on the stock and a $56 price target implying a 32% rally from current levels.

Tuesday’s report comes after Uber last week disclosed its net losses in the first quarter totaled $1.01 billion. Lyft which Goldman Sachs initiated with a “neutral” rating is facing many of the same challenges, Goldman says.

Goldman Sachs and Morgan Stanley were counted among Uber’s lead bookrunners for its disastrousinitial public offering. The stock is trading just below the $45 where it priced last month.

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Author: Joseph Oladokun

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