If a CEO is spending millions on company stock, it’s often worth investigating the stock further. These insiders tend to have an intimate understanding of their businesses and are usually way ahead of analysts and portfolio managers when it comes to revenue and earnings trends.
In this report, we are going to highlight a large CEO purchase at Uber Technologies Inc (UBER:US). Uber is an American technology company that offers mobility and food delivery services. A global operator, it provides its services in over 70 countries and 10,000 cities worldwide. The company is listed on the New York Stock Exchange and currently has a market capitalization of $88.8 billion.
Uber Technologies Inc: Insider Buying
Our insider transaction data shows that on November 15, Uber CEO Dara Khosrowshahi bought 200,000 shares at a price of $44.92 per share. This trade cost the insider approximately $9.0 million and increased his holding to 1.178 million shares.
Largest Purchase Since IPO
This insider transaction is worth highlighting for a couple of reasons.
Firstly, it’s a very large purchase. Our data shows that it is actually the largest insider purchase at Uber since the company went public in May 2019. The fact that the CEO has spent $9.0 million on stock, and increased the size of his holding by 20%, suggests that he is very confident the stock is set to move higher.
Secondly, Mr. Khosrowshahi’s last purchase was timed well. Back in November 2019, the insider spent $6.7 million on UBER stock when it was trading at $26.75. Over the next three months, the stock rose around 50%.
First Profitable Quarter
Uber’s recent third-quarter results showed that the company is benefiting as the world reopens after the pandemic.
For the three months ended September 30, gross bookings amounted to $23.1 billion (an all-time high), up 57% year over year. Meanwhile, revenue was up 72% year on year to $4.8 billion – well above the consensus forecast of $4.4 billion.
Encouragingly, the group posted adjusted EBITDA of $8.0 million (+$633 million year on year), which represented its first positive quarterly adjusted EBITDA figure as a public company.
“While we recognize it’s just a step, reaching total-company adjusted EBITDA profitability is an important milestone for Uber,” commented CFO Nelson Chai. “Not only did our Mobility business recover to pre-Covid margins this quarter, our core restaurant delivery business was profitable on an adjusted EBITDA basis for the first time as well, bringing the full Delivery segment close to breakeven,” he added.
Looking ahead, analysts expect Uber to emerge stronger from the pandemic, as driver shortages ease and the company’s delivery business gets bigger. Currently, the average price target for the stock is $67, which implies upside of around 46% from current levels.
In light of Uber’s momentum, we see the insider buying here as a bullish indicator. It suggests that the CEO believes the market is not pricing in future growth.