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With their stocks trading near 52-week highs, Uber Technologies (UBER - Free Report) and Avis Budget Group (CAR - Free Report) are two transportation service providers that investors may be eying for more upside.

Amid hopes of an Israel-Iran truce and Fed Chair Jerome Powell’s testimony to Congress that interest rates could be cut sooner rather than later, Uber and Avis stock were two standouts in Tuesday’s broader market rally, spiking +7% and +17% respectively.

Image Source: Zacks Investment Research

Bullish Sentiment for UBER & CAR Stock 
 

The continued spike in Uber stock comes on the announcement that its ride-hailing platform will be expanding fully autonomous robotaxi rides to more U.S. cities through its partnership with Alphabet's (GOOGL - Free Report) wholly owned subsidiary Waymo. Expanding to Atlanta and offering robotaxi services in Phoenix and Austin, Uber has used Waymo’s autonomous driving features that are integrated in the Jaguar Land Rover I-PACE electric SUV. Investors have long awaited the future innovation of robotaxis from Tesla (TSLA - Free Report), and the use of the I-Pace has strengthened Uber’s brand and market expansion while helping the company stay ahead in the autonomous mobility race without the upfront capital burden, since Waymo handles the technology. Additionally, Uber has a partnership with Tesla as well, focused on EV expansion, with Uber drivers getting discounted purchases when buying Tesla’s or renting Tesla’s via Hertz (HTZ - Free Report).

Similarly, Avis stock is thriving as the leading car rental operator has prioritized better vehicle utilization by improving its car fleet with EV models from Kia and French automaker Renault. Leading to higher investor sentiment, Avis’s upgraded fleet is expected to improve its operational performance by lowering maintenance costs, in an expected return to a higher-margin business model. Furthermore, Avis has invested in EV infrastructure through charging stations at major rental hubs and has received a boost from tariffs on imported vehicles, as this has made buying new cars more expensive and raised the value of the company’s fleet of used vehicles that can be bought on its dedicated platform, Avis Car Sales.

Uber & Avis Outlook
 

Based on Zacks' estimates, Uber’s total sales are currently forecasted to increase 15% in fiscal 2025 and FY26, with projections edging toward $60 billion. Following a record-breaking year for earnings, Uber’s bottom line is expected to contract to $2.90 a share in FY25 from EPS of $4.56 in 2024 ($9.86 billion in net income). That said, FY26 EPS is projected to rebound and rise 22% to $3.53.

Pivoting to Avis, FY25 sales are expected to slightly dip to $11.71 billion from $11.79 billion last year. However, FY26 sales are projected to rise 2% to $11.95 billion. More intriguing, Avis’s annual earnings are slated to dip 28% this year to $2.69 per share, but FY26 EPS is forecasted to rebound and soar over 400% to $13.84.

Monitoring Uber & Avis’s Valuation
 

At current levels, Uber stock doesn’t trade at a stretched premium to the benchmark S&P 500’s forward P/E average at 29.4X. While Avis's 54.7X forward earnings multiple is starting to look stretched, its expected EPS jump in FY26 is starting to justify the premium to the broader market.

Plus, Avis stock does trade well under the optimum level of less than 2X forward sales, and Uber’s top line expansion justifies a 3.5X forward P/S multiple.

Image Source: Zacks Investment Research

Conclusion & Strategic Thoughts
 

Although it's tempting to buy into the extensive year-to-date rally in Uber and Avis stock, both land a Zacks Rank #3 (Hold) at the moment. Holding stock in these leading transportation service providers could still be rewarding for those who are already invested, and it may be too soon to fade the latest rally given such bullish sentiment. Still, a pullback would certainly deliver better buying opportunities and could serve as a “healthy correction” for UBER and CAR shares at some point.

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