Uber Rises as It's Named Morgan Stanley's Top Internet Pick, Sells Uber Eats India

Uber rises after being named Morgan Stanley’s top U.S. internet stock pick for 2020. The company also announces the sale of Uber Eats in India.

Shares of Uber Technologies  (UBER) - Get Report gained on Tuesday after the company was named Morgan Stanley’s top U.S. internet stock pick for 2020, and as it announced the sale of Uber Eats in India to rival Zomato in a $172 million deal.

Uber was up more than 3% at $36.37 in morning trading on Tuesday after Morgan Stanley named it the top U.S. internet pick for the year, and predicted a 57% rally in the ride-hailing giant’s stock on improving profitability and the potential for additional growth in ride-sharing services.

The firm has a $55 price target on Uber’s stock, among the more bullish on Wall Street.

Facebook  (FB) - Get Report and Google-parent Alphabet  (GOOGL) - Get Report were named Morgan Stanley’s top online advertising picks, with the broker seeing Instagram Stories as a “material” driver for Facebook in 2020, while Alphabet is expected to see a revenue boost from Google Maps, Discover Feed and other new e-commerce products.

Uber shares also got a lift after it confirmed plans to sell its Uber Eats operations in India to local rival Zomato.

As part of the deal, Uber Eats India will direct all restaurants, delivery companies and diners to Zomato. No specific financial details were provided, though sources told Bloomberg the value of the Zomato shares Uber will receive is estimated at about $172 million.

In an update to clients on Thursday, Wedbush analysts Ygal Arounian and Daniel Ives pegged the sale closer to $355 million, based on their own valuation of Zoomato. 

More importantly, the analysts pointed to the end of "...a dark chapter for Uber Eats in India," which as in other markets has struggled for marketshare in a crowded space. 

"With take rates and profitability prospects under pressure in the food delivery business both domestically and internationally Uber needs to narrow its vision on the food delivery side of the house in our opinion," the analysts said, adding that investor optimism on Uber is "starting to finally perk up."

Uber shares have gained 18% this year, though are still 22% down from their initial public offering in May.  

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