Shares of Uber (UBER) are under pressure on Thursday after the company reported first-quarter results, with losses per share dramatically improving but revenue coming in below estimates. Meanwhile, the Labor Department is rescinding the "Independent Contractor" rule, which was put in place by the Trump administration and made it more difficult for gig and contract workers to argue they were entitled to minimum wage and overtime protections. While Wedbush analyst Ygal Arounian cut Uber's price target and called the regulatory environment "the elephant in the room," his peer at Morgan Stanley told investors that he sees labor regulation as "likely manageable".

RESULTS: Uber reported first-quarter losses per share of (6c), which was better than the expected (54c), and revenue of $2.9B, below consensus at $3.28B. Gross bookings grew 24% year-over-year to $19.5B, while adjusted EBITDA of ($359M) improved by $95M versus the fourth quarter. The company reported first-quarter gross mobility bookings of $6.8B, down 36% year-over-year in constant currency. In delivery, gross bookings of $12.5B grew 157% year-over-year on a constant currency basis, Uber added, pointing out that monthly active platform consumers were 98M versus 103M last year.

MOBILITY RECOVERY: Following the quarterly report, Deutsche Bank analyst Lloyd Walmsley raised the firm's price target on Uber to $85 from $82, while keeping a Buy rating on the shares. The analyst came away from Uber's first-quarter results feeling better about the recovery in the mobility business given the rebound in many markets, including several where growth is already above 2019 levels. He believes Uber's recovery and profitability is on track despite transitory investments.

JPMorgan analyst Doug Anmuth also raised the firm's price target on Uber to $74 from $72 and kept an Overweight rating on the shares following the company's first-quarter results. The company's Mobility segment continues to recover while Delivery remains strong, Anmuth told investors in a research note. The analyst believes delivery demand can sustain even as Mobility comes back, as evidenced in Sydney and New York City, where Delivery has held up well, even as dining has reopened.

TRUMP-ERA RULE: While Piper Sandler analyst Alexander Potter acknowledged that Uber posted good quarterly results, he believes its "strong financials were incapable of distracting investors from an increasingly confrontational Department of Labor." The analyst pointed out that the Biden administration canceled a Trump-era rule that would have made it easier for businesses to classify workers as contractors. Driver shortages and spending on driver incentives are also headwinds. Potter lowered the firm's price target on Uber to $55 from $58, while keeping a Neutral rating on the shares.

Wedbush analyst Ygal Arounian also lowered the firm's price target on Uber to $66 from $76 and kept an Outperform rating on the shares following quarterly results. The analyst noted that "the elephant in the room" is the regulatory environment, which has thrown uncertainty into the employee versus contractor debate with the latest moves coming out of the Biden Administration.

Commenting on the news that the Labor Department is rescinding the "Independent Contractor" rule put in place by the Trump administration that made it harder for gig and contract workers to argue they were entitled to minimum wage and overtime protections, Cowen's Washington Research Group said in a research note to investors on Wednesday it believes that while still a long way to go in the Biden/gig worker story, the Department of Labor's comments about gig workers and rulemakings seem "incrementally encouraging" for Uber, Lyft (LYFT), DoorDash (DASH) and GrubHub (GRUB). The firm noted that a Department of Labor spokesperson said two "noteworthy" things, namely that the Department of Labor is withdrawing the Trump rule on defining "employee" versus "independent contractor," and that it won't be enacting its own rule in the near future. "DOL only has two tools to push companies to treat ICs as 'employees' - rulemaking and 'strategic enforcement' and today DOL seemed to really downplay rulemaking, which is a strong regulatory lever," Cowen's Washington Research Group said.

Voicing a similar opinion, Morgan Stanley analyst Brian Nowak told investors that he sees labor regulation as "likely manageable." While he acknowledged that there is near-term uncertainty, the analyst would be a buyer on incremental weakness. Nowak has an Overweight rating and a price target of $72 on Uber's shares, trimmed from his previous $75 per share target.

PRICE ACTION: In morning trading, shares of Uber have dropped over 7% to $47.48.