We came across a bullish thesis on Uber Technologies, Inc. (UBER) on Rijnberk InvestInsights’ Substack by Daan Rijnberk. In this article, we will summarize the bulls’ thesis on UBER. Uber Technologies, Inc. (UBER)’s share was trading at $73.25 as of Nov 1st. UBER’s trailing and forward P/E were 36.08 and 30.77 respectively according to Yahoo Finance.
A close up view of a hand holding a smartphone, using a ride sharing app.
Uber Technologies remains a compelling growth story, as demonstrated by its strong Q3 2024 earnings, which reinforce the company’s resilience and growth trajectory. While the market’s reaction led to a sharp 11% drop in share price due to conservative guidance, Uber’s fundamentals and growth drivers appear as robust as ever, positioning it favorably for substantial upside.
In Q3, Uber’s results surpassed expectations, with revenue reaching $11.2 billion, up 21% year-over-year, driven by steady growth in gross bookings and engagement. Gross bookings totaled $41 billion, a 16% increase YoY, with U.S. bookings showing strong resilience despite economic pressures like inflation. The core Mobility segment saw 17% growth in U.S. bookings, while international performance was impacted by currency headwinds. This growth reflects both a loyal user base and high engagement levels, as Monthly Active Platform Consumers (MAPCs) rose 13% YoY to 161 million, with users increasingly relying on Uber’s platform for both Mobility and Delivery services.
Trip growth remained solid, with 2.9 billion trips completed in Q3, up 17% YoY, underscoring Uber’s scalability and consumer appeal across markets. This growth is enhanced by rising engagement, with booking frequency per MAPC increasing 4% to an average of 5.9 trips per user. Meanwhile, revenue growth outpaced gross bookings, driven by lower refunds, reduced supply-side incentives, and a rapidly scaling advertising business. Advertising revenue grew 80% YoY, reaching a $1 billion annual run rate, highlighting Uber’s ability to diversify revenue streams and improve its take rate.
Uber is poised to benefit substantially from the autonomous vehicle (AV) and robotaxi revolution, positioning itself as the ideal platform for large-scale AV integration. Recent developments reinforce Uber’s advantage, with multiple AV partnerships including deals with Cruise, Coco, Wayve, WeRide, and Avride, bringing its total AV partnerships to 14. Uber’s platform, with over 160 million registered users, provides AV companies an unparalleled gateway to consumers, making it a natural partner for firms that wish to scale without building a platform from scratch. Tesla’s recent robotaxi event, which lacked clear advancements in autonomous driving, only bolstered Uber’s position as a leader in this space. Analysts like Jefferies’ John Colantuoni agree that the Tesla event reassured investors that Uber’s role as an enabler rather than a competitor in AV will drive long-term growth.
Uber is focused on remaining capital-light, emphasizing partnerships over building its own AV fleet. Its extended partnership with Waymo illustrates this strategy well, where Uber manages and dispatches Waymo’s AV fleet while Waymo handles vehicle operations and roadside support. This approach not only enhances Uber’s moat but also enables the company to capitalize on the AV trend with limited capital risk. With its established user base and strong platform, Uber is set to become a central distributor for most AV operators globally, fueling growth and platform loyalty.
Meanwhile, Uber has reportedly explored the idea of acquiring Expedia, potentially creating a “super app” that combines Uber’s high-frequency services with Expedia’s low-frequency, high-value transactions. This synergy could transform Uber’s platform into a one-stop travel solution. Although Uber CEO Dara Khosrowshahi, a former Expedia CEO, is familiar with the business, a large acquisition poses complexity and risks, and analysts remain skeptical. Uber’s focus on organic growth and current success diminishes the urgency of such a deal, as Khosrowshahi has clarified Uber isn’t seeking major acquisitions at present.
Uber’s Q4 outlook projects gross bookings between $42.75 billion and $44.25 billion, marking a 16% to 20% year-over-year growth in constant currency. While this falls slightly below consensus expectations at the midpoint, it still signals robust trip growth and reflects the company’s strong underlying performance. Management forecasts adjusted EBITDA for Q4 to be between $1.78 billion and $1.88 billion, which represents a 39% to 47% increase from the previous year, demonstrating Uber’s consistent margin expansion and solid operating leverage.
For the full year 2024, Uber anticipates 20% gross bookings growth alongside an impressive adjusted EBITDA growth of around 60% year-over-year, positioning it well to meet its investor-day growth targets. Through 2026, the company projects a compound annual revenue growth rate (CAGR) in the mid-to-high teens, with adjusted EBITDA growth in the high 30% to 40% range and free cash flow (FCF) expected to exceed 90% of EBITDA. These medium-term goals illustrate Uber’s confidence in sustaining high-growth metrics and improved cash flow conversion, indicating potential long-term value creation.
Despite recent stock volatility, which left shares 15% below recent highs, Uber continues to demonstrate exceptional operational execution under its capable CEO, maintaining an aggressive growth trajectory. With shares currently trading at approximately 24x EV/EBITDA, some might view this as a premium; however, considering Uber’s projected EBITDA growth and competitive moat, the valuation appears warranted. Using a normalized long-term EBITDA multiple of 18x, an end-of-2026 target price of $98 per share is plausible, implying an attractive 14% compound annual growth rate (CAGR), making it an appealing investment opportunity.
Uber Technologies, Inc. (UBER) is on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 145 hedge fund portfolios held UBER at the end of the second quarter which was 130 in the previous quarter. While we acknowledge the risk and potential of UBER as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than UBER but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.