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Why Uber Stock Is Soaring Today

Motley Fool - Wed Feb 14, 12:00PM CST

Uber(NYSE: UBER) stock is posting big gains in Wednesday's trading. The company's share price was up 11.4% as of noon ET today, according to data from S&P Global Market Intelligence.

Uber published a press release before the market opened this morning announcing that it would be buying back stock for the first time in its history. The announcement said that the company's board of directors had authorized up to $7 billion in share repurchases.

It's also possible that Uber stock is getting a lift from recent results published by a major competitor.

Wall Street loves Uber's buyback plan

Uber's move to repurchase its own stock suggests that the company's board of directors believes shares are currently undervalued. The move will also benefit the company's earnings per share.

When a company buys back its own stock, it typically retires those shares, reducing the total number of shares outstanding. This means that any earnings generated are divided by a smaller number of shares, which has the effect of boosting the amount of profit per share.

Lyft's recent fourth-quarter report could also be good news for Uber

Besides the encouraging buyback news, there's a good chance that Uber stock is getting a boost from Lyft's better-than-expected fourth-quarter results and guidance. Lyft recorded adjusted earnings per share of $0.18 on sales of $1.22 billion, with profits in the period coming in much better than the average analyst estimate for per-share earnings of $0.08.

For the first quarter, Lyft expects bookings to come in between $3.5 billion and $3.6 billion, beating Wall Street's previous call for bookings of $3.46 billion. Rather than signaling a threat to Uber, the guidance indicates that the ride-hailing space is looking healthier than previously thought.

Lyft also said that it expects to generate positive free cash flow in 2024 -- the first time the company will have achieved that on an annual basis. This news comes on the heels of Uber recording its first year of profitability. The economics of ride-sharing and related services appear to be shifting in favorable directions, and that bodes well for Uber.

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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Uber Technologies. The Motley Fool has a disclosure policy.

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