Uber (UBER): Dutch Court Rules Drivers are Employees and Not Contractors but Shares Still Gain as Goldman Starts at Buy and Sees 60% Upside

The Amsterdam District Court ruled that Uber (NYSE: UBER) drivers are employees and not contractors, hence they deserved greater workers’ rights.

Today’s ruling marks another blow for Uber and a victory for unions fighting for the rights of workers in the gig economy.

"The legal relationship between Uber and these drivers meets all the characteristics of an employment contract," the ruling said.

The US-based ride-sharing and delivery company said it will appeal the ruling.

"We are disappointed with this decision because we know that the overwhelming majority of drivers wish to remain independent. Drivers don’t want to give up their freedom to choose if, when and where to work,” Maurits Schönfeld, Uber's general manager for northern Europe said.

Still, shares of Uber are up about 1% in today’s pre-open after Goldman Sachs analyst Eric Sheridan started with a Buy rating and a $64.00 per share price target. He believes the company is developing the next “super app” in the internet world.

“Across its array of products, we see Uber as the next large cap platform ecosystem in our coverage universe – scale of user and economic capture around a common theme of local transportation and eCommerce. While the rate of recovery in its Mobility business and the rate of normalization in Delivery will likely dominate short-term debates among investors, we think the longer-term focus is around the flywheel effect of platform users (increasingly subscription and loyalty based). Specifically, we are bullish on the concept of how a collection of products can capture increasing wallet share across multiple end markets with secular growth & rising online penetration rates,” the analyst said in a client note.

Sheridan outlines three key questions for Uber. Answers to these questions will shape the company’s future.

1) Will Uber be able to sustain ~20% revenue growth as a ’21-’26 CAGR? Goldman says Yes.

2) Can Uber achieve its long-term profitability targets given industry and regulatory dynamics? Goldman says Yes.

3) Will Uber be successful in non-food delivery in driving more local commerce on to its platform? Goldman says Uncertain.

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