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Uber Surges After CEO Khosrowshahi Forecasts Profitability by the End of 2020

Uber shares opened at a six month high Friday after the ride-hailing group forecast an earlier-than-expected target of late 2020 to start turning a profit.

Uber Technologies  (UBER) - Get Uber Technologies, Inc. Report shares surged to a six-month high Friday after the group said it would start being profitable by the end of 2020, a year ahead of its prior forecast, as it focuses on premium rides and better returns from its food delivery business.

Uber posted a narrower-than-expected fourth quarter loss of 64 cents per share, a figure that translates to red ink of around $1.1 billion, a losses mounted in its food delivery business, Uber Eats, and compensation costs, investments and other expenses that totaled $5.04 billion ate into its bottom line. 

The group's core ride hailing business, however, which comprises around three quarters of its overall revenues, saw bookings rise 28%, to $18.13 billion, lifting the top line 38% from last year to a Street forecast-beating $4.1 billion. 

"With many of the onetime changes from 2019 behind us, we’re excited to sharpen our focus on execution to grow our business at massive scale, innovate faster than anyone else, improve margins considerably, allocate our capital effectively and efficiently and do the right thing for all of our constituencies, ultimately driving to excellent revenue growth and profitability," CEO Dara Khosrowshahi told investors on a conference call late Thursday.

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"Our progress in 2019 and our 2020 plans gives me the confidence to challenge our teams to accelerate our EBITDA profitability target from full year 2021 to Q4 2020," he added. "It’s important to emphasize that we plan to achieve this profitably target assuming only modest improvements in the current competitive environment and without the assumption of any significant changes to our current portfolio businesses."

Uber shares were marked 8.1% higher in early trading Friday to change hands at $40.05 each, a level that bumps the stock to a modest six-month gain but still trails its May 2019 IPO price of $45 per share.

"Uber's Q4 results continued to demonstrate an ability to grow at scale while improving profitability," said Canaccord Genuity analyst Michael Graham, who boosted his price target on the group to $55 per share and kept his buy rating unchanged following last night's earnings. "Bookings growth for Rides slightly missed our estimate while Eats bookings exceeded our forecast."

"Uber sees 2020 as a transformational year ushering in an era of profitable growth, and we think these results go a long way in that direction," he added. "While the stock still sits modestly below the IPO price, continued execution and a very reasonable valuation should be important factors helping the stock move higher."