Several Wall Street analysts started coverage of Uber (UBER) on Tuesday with Buy-equivalent ratings, honoring a grace period seen by the underwriting firms. With the stock down from the company’s recent IPO and following mixed quarterly results last week, analysts believe this could be a buying opportunity for investors.

MARKET 'LEADER' POSITION

In a research note to investors, Oppenheimer analyst Jason Helfstein started coverage of Uber with an Outperform rating and $55 price target. The analyst noted that Uber has carved out a categorical market leader position in ridesharing and online food delivery. Aside from the company's leading technology, Uber boasts superior network liquidity compared to peers, with more than 93M global monthly active platforms customers, he added. Further, Helfstein believes ridesharing and online food delivery adoption are still under-penetrated globally, and thinks Uber's technology and network liquidity are better positioned than peers to capture additional market share.

Also highlighting the dominant share in almost every geography and its "global brand," Loop Capital analyst Jeffrey Kauffman also initiated Uber with a Buy rating and a price target of $54. The analyst also cited the company's successful category expansion, as its Uber Eats business generated a "rapid scale escalation and revenue ramp." Kauffman believes Uber has the potential to benefit further from its opportunities in freight and with autonomous vehicle development.

Uber is still in the early innings in its core ridesharing and Eats businesses as well as in its emerging opportunities of Freight, Autonomous and "New Mobility," Morgan Stanley analyst Brian Nowak contended. The analyst believes Uber's platform has a long runway to grow users and frequency, and with scale comes a "path toward profitability." While investment spending will pressure EBITDA, Nowak models Uber to approach break-even in 2022, as he starts coverage on the name with an Overweight rating and a $56 price target.

INTENSE COMPETITION

Meanwhile, Mizuho analyst James Lee initiated Uber with a Buy rating and a $50 price target. The "current intense competition" will likely rationalize over the next few years, the analyst noted, arguing that Uber has "ample room" to gain operating leverage from economies of scale. Lee also highlighted that Uber has a “category-leading” position in ridesharing, which makes up nearly 70% of its overall total addressable market of nearly $6T.

Preferring Uber over Lyft (LYFT), Barclays analyst Ross Sandler also started Uber with an Overweight rating and $50 price target. Consensus expectations are "too bearish" on rides unit economics, which are near breakeven for Uber and slowly approaching that level for Lyft, Sandler contended, adding that he believes sentiment seems "washed out and negative" on Uber shares.

Meanwhile, Needham, William Blair, Canaccord, SunTrust, Cowen, JMP Securities, Deutsche Bank, BTIG and Bank of America Merrill Lynch also started coverage of Uber with Buy-equivalent ratings.

CITI ON THE SIDELINES

Not as bullish, Citi analyst Mark May started Uber Technologies with a Neutral rating and a $45 price target. The analyst told investors in a research note of his own that the recent rise in competition in certain markets, regulatory pushback, and potential limits on penetration levels at current price points have created forecasting uncertainty. Further, May believes investors need to determine if autonomous vehicles represent an opportunity or risk to Uber.

BUY LYFT

Alongside his initiation of Uber with a Buy rating and a $80 price target, BTIG analyst Walter Piecyk started coverage of Lyft with a Buy rating and a $77 price target. He expects the autonomous vehicle technology to begin positively impacting the companies' results within the next five years. The analyst believes the two companies are well positioned to benefit from this disruptive force that will impact multiple industries over the coming 10-20 years, and thinks both will reach positive EBITDA in 2024.

Citi analyst Itay Michaeli also started Lyft with a Buy rating and $70 price target, saying he views the company as well positioned to participate in the long-term upside proposition in ridesharing. Voicing a similar opinion, his peer at SunTrust initiated Lyft with a Buy and $68 price target. Analyst Youssef Squali noted that with about a 30% gross booking market share in the Transportation-as-a-Service platform, the company is benefiting from the "secular and demographic trends." The "advancing set" of consumer preferences, along with ubiquity of mobile devices, is translating into a sustainable growth path for Lyft for years to come, Michaeli contended.

PRICE ACTION

In morning trading, shares of Uber dropped about 1% to $41.03, while Lyft's stock slipped almost 2% to $58.52.