Financial Experts’ Top 5 Restaurant & Delivery Apps

Move over takeout. There’s a new game in town.

Restaurants embraced delivery apps during the pandemic to keep business moving. 

Food delivery has grown to a trillion-dollar market in the U.S.

And financial pros are hot on the trail of the top plays in the industry.

While DoorDash (DASH) and Toast (TOST) garnered some attention, it was Uber Technologies (UBER) led the top five.

With food delivery now accounting for as much revenue as ride-sharing, Uber’s latest earnings call pushed the stock into new all-time highs.

We’re going to take a deeper look at this logistics behemoth and see whether the sleeping giant has finally awakened.

Uber’s Business

The taxi industry wasn’t one most investors expected to be upended.

Yet, Uber’s app technology changed how we move through ride-sharing – a practice that allows people to become taxi and delivery drivers on their schedule using their vehicles.

Uber boasts over 91 million active consumers, 5.4 million drivers, and operations in 10,500 cities in 72 countries globally.

The company’s business breaks down into three categories:

• Mobility (51% of revenues) – Passenger transportation
• Delivery (45% of revenues) – Restaurant and grocery delivery
• Freight(4% of revenues) – Freight and package shipping

Source: Uber Investor Deck

Navigating the regulatory landscape hasn’t been easy for the company.

To smooth things over, Uber has partnered with taxi companies in many locations, helping them grow alongside the company.

Uber’s latest earning report highlighted an inflection point as the company finally turned a sizable P&L profit.

Financials

Source: Stock Analysis

Uber has had no problem increasing sales. It’s just struggled to do it profitably.

That’s why 2023 was a turning point for the company.

While gross margins were down, operating and profit margins turned positive, as did free-cash-flow.

Along with the fantastic results, management announced a $7 billion share repurchase program, a yield of about 4.3%.

Assuming management is correct, and the company can grow profitably from here on out, there’s a lot of upside potential.

Valuation

Source: Seeking Alpha

Uber isn’t necessarily cheap by P/E or price-to-cash flow valuations.

Lyft (LYFT) trades at 28.5x earnings, while DoorDash trades at 27.6x cash.

Neither of those is what we’d consider a good value. 

What is notable is Uber generates a P&L profit. No other peer did that last year on a GAAP basis.

Growth

Source: Seeking Alpha

All of these app companies have no problem driving revenue growth.

Only Uber has managed to turn that into sustainable profits.

Most are forecasting a decent year in sales gains in 2024, between 15%-25%. With Uber at the lower end, this could leave some extra room on the upside for them.

Profitability

Source: Seeking Alpha

Uber doesn’t have the best gross margins. But, as we said before, it’s the only one to turn a P&L profit.

Now, some of its peers, like Toast, DoorDash, and Grab (GRAB) generate higher free-cash-flow margins. 

DoorDash’s P&L profits are hurt by stock-based compensation, as are Toast’s.

This is common amongst newer companies. However, Uber has high stock compensation costs as well. Yet, it generates a healthy P&L profit.

Our Opinion 8/10

We’re pleasantly surprised by the turnaround in Uber’s stock.

The buyback announcement also brings in a whole new set of value investors.

So long as the company can scale profitably, it has a lot of runway ahead.

While there could be pullbacks in the near future, this is one you can ease into at current levels if you plan to hold for the long-term.