UBER Stock Benefits From a Favorable Court Ruling
Shares of Uber Technologies UBER have been performing well on the bourses lately, gaining 7.2% over the past two trading sessions. The upside can be attributed to a verdict issued by a New York City judge prohibiting pay raises for ride-sharing companies. The hikes were demanded by New York City's Taxi and Limousine Commission.
The judge while delivering his verdict against the commission stated that it had used a faulty methodology to calculate the pay hike. The commission had used factors like the last summer’s steep increase in gas prices, which has come down since.
The ruling vindicates Uber’s stand. It had sued the commission last month to try to block a significant pay increase for its drivers. Uber found the proposed increases unprecedented.
In the lawsuit, Uber had stated last month that in the event of an unfavorable court ruling it would be forced to incur additional monthly cost in the band of $21-$23 million. In turn, Uber would have had to raise fares to drive its bottom line.
Given this backdrop, the judge’s ruling has come as a boon for Uber. No wonder, its shares are rising.
The ruling, which has prevented labor costs of ride sharing companies from increasing significantly, has also positively impacted the stock price of Uber’s rival Lyft LYFT. Shares of Lyft have risen 11.8% over the past two trading days.
Following the judge’s ruling, the New York Taxi Workers Alliance, which represents 25,000 taxi drivers in the city, tweeted, "A few missing words in a Statement of Basis and Purpose does not justify denying a raise meant to help thousands of drivers with rent and groceries. Shame on Uber for spending millions on this heartless lawsuit only to deny drivers an increase of $1.66 more on an average trip."
The alliance wants the New York City's Taxi and Limousine Commission to tweak the rules in such a manner that in the future the ruling is in favor of a pay hike for drivers. Consequently, we expect investors to remain glued for further updates on this burning issue.
Zacks Rank & Key Pick
Currently, Uber carries a Zacks Rank #4 (Sell), while Lyft is Zacks #3 Ranked (Hold).
Investors interested in the Internet-Services industry may, however, consider Baidu BIDU, currently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
BIDU offers a Chinese language search platform with a network of third-party websites and software applications.
BIDU has a stellar earnings surprise history, having outperformed the Zacks Consensus Estimate in each of the preceding four quarters, the average being 50.2%.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Baidu, Inc. (BIDU) : Free Stock Analysis Report
Lyft, Inc. (LYFT) : Free Stock Analysis Report
Uber Technologies, Inc. (UBER) : Free Stock Analysis Report
