Uber Technologies will offer autonomous vehicles from General Motors-backed Cruise starting next year. While Uber stock opened lower on Friday, analysts see the deal as evidence that Uber will benefit as self-driving vehicles expand, with more partnerships to come.
Uber said late Thursday that its ride-hailing app will offer an undisclosed number of Chevy Bolt-based autonomous vehicles to users seeking rides starting next year. The announcement did not disclose the location.
Dara Khosrowshahi, Uber's Chief Executive, teased during the company's earnings call earlier this month that Uber would soon announce a new self-driving car partnership. Uber also struck a partnership last year to offer cars from Google's self-driving company Waymo in Phoenix.
Evercore ISI analyst Mark Mahaney expects Uber to continue expanding AV offerings on its network.
"Uber is the largest ride-share demand aggregator," Mahaney wrote to clients Thursday. "So AV companies looking to scale their businesses, increase the utilization of their fixed assets, and generate a good return on their AV investments, will seriously consider partnering with Uber."
That means more demand for Uber, Mahaney added, "which in turn means more bookings and more revenue and more profit."
Uber Stock Falls After Deal Announcement
Still, Uber stock fell in late trading Thursday after the deal was announced. The stock opened lower on the stock market today but has recovered to trade a fraction higher at 73.75 in recent action.
Mahaney said the initial reaction was likely driven by letdown that the announcement was not a Tesla partnership, or an expanded deal with Waymo.
Tesla's plan to launch its own robotaxi service – as previously stated by Chief Executive Elon Musk – has weighed on Uber shares this year. Investors fear Tesla could increase competition for Uber and Lyft by offering its own app. Tesla is hosting an event in October to further detail its plans.
Meanwhile, Cruise halted testing operations last fall after one of its self-driving cars struck and dragged a pedestrian in San Francisco. The pedestrian was hit by a human-driven car first and pushed into the Cruise vehicles path.
Cruise resumed testing its driverless vehicles this spring in Phoenix, Houston and Dallas. The company is utilizing a "safety driver" in the cars during the tests.
"As the largest mobility and delivery platform, we believe Uber can play an important role in helping to safely and reliably introduce autonomous technology to consumers and cities around the world," Khosrowshahi said in a news release Thursday.
More Partnerships To Come For Uber?
Analysts expect there are more partnerships to come for Uber. Deutsche Bank analyst Benjamin Black noted following Thursday's announcement that investors were more hopeful for an expanded Waymo partnership.
"But we note that the Cruise agreement is nonexclusive, and we do not think it precludes an extension of the Waymo AV partnership to cities beyond Phoenix," Black wrote to clients Friday.
Meanwhile, BofA Securities analyst Justin Post said Thursday that the Cruise partnership "reinforces" that fleet operators will want to utilize Uber's ability to aggregate rider demand.
"At this time, we are not expecting Tesla to partner with Uber," Post wrote to clients. "But we think growing competition between Amazon's Zoox, Cruise, Waymo, Tesla and others could drive more interest in partnerships."
Uber Stock Up 20% Post Q2 Earnings
Post added that autonomous vehicles are still in early stages. Despite investor attention, financial implications from AVs are likely "several years out," he wrote.
BofA holds a buy rating for Uber. Deutsche Bank also rates Uber a buy while Evercore ISI has a positive outperform call.
While Uber slumped for much of this spring, shares have bounced back. Uber stock has gained more than 20% since reporting second quarter earnings on Aug. 6. Overall, the stock has gained 25% this year and more than 60% over the past 12 months.
Shares have formed a consolidation base with a buy point of 82.14, according to MarketSurge charts pattern recognition.
