3. Uber Technologies, Inc. (NYSE:UBER)
Number of Hedge Fund Holders: 130
Annual Sales Growth Over the Past 5 Years: 31.46%
Based in San Francisco, California, Uber Technologies, Inc. (NYSE:UBER) operates as a technology platform that connects consumers with independent ride service providers, offering a variety of transportation options such as public transit, bikes, and scooters. Additionally, Uber provides on-demand food delivery, freight services, business fleet solutions, and same-day delivery. The platform serves over 142 million monthly active consumers across 70 countries.
Uber Technologies, Inc. (NYSE:UBER) reported its Q1 results last month, with revenue rising 15.1% year-over-year to $10.13 billion, surpassing estimates by $40 million. Mobility revenue surged 30%, delivery revenue increased by 4%, while freight revenue declined by 4%. Uber is actively expanding its delivery segment through new partnerships and features to reduce its dependency on the Mobility segment.
Citi has raised its price target for Uber Technologies, Inc. (NYSE:UBER) shares to $96 from $93, maintaining a Buy rating. This adjustment follows a series of meetings with Uber’s CFO Prashanth Mahendra-Rajah and VP of Investor Relations & Corporate Finance Deepa Subramanian during a non-deal roadshow (NDR) in the Middle East. These discussions strengthened Citi’s confidence in Uber Technologies, Inc. (NYSE:UBER)’s ability to achieve its compounded annual growth rate targets for Gross Bookings and EBITDA over the next three years, as outlined in the company’s February Investor Update.
However, on another front, the company faces a significant legal challenge, with the 9th U.S. Circuit Court of Appeals in San Francisco upholding a lower court’s decision regarding California’s gig worker law, which requires companies to reclassify their drivers from independent contractors to employees. This ruling could potentially increase operating costs for companies like Uber Technologies, Inc. (NYSE:UBER).
In Q1 of 2024, 130 hedge funds had investments in Uber Technologies, Inc. (NYSE:UBER), with positions worth $10.1 billion. GQG Partners is the top investor in the company as of March 31, and has a position worth $1.72 billion.
RiverPark Large Growth Fund stated the following regarding Uber Technologies, Inc. (NYSE:UBER) in its first quarter 2024 investor letter:
“Uber Technologies, Inc. (NYSE:UBER): UBER was a top contributor in the quarter following better than expected 4Q23 earnings and 1Q24 guidance. Gross bookings of $37.6 billion were up 22% year over year. Mobility gross bookings of $19.3 billion grew 29% over last year driven by a combination of product innovation and driver availability. Delivery gross bookings of $17 billion were up 19% from last year and continued to be strong throughout the quarter. 4Q Adjusted EBITDA of $1.3 billion, up $618 million year over year, was better than management’s guidance of $1.2 billion, and the company generated $768 million of free cash flow, up from a cash loss of $303 million last year. Management guided to continuing growth in 1Q Gross Bookings (20% growth) and Adjusted EBITDA (of $1.3 billion). The company hosted a well-received analyst day in February during which it guided to three year compounded annual growth rates for gross bookings of mid-to-high single digits and EBITDA of 30-40%, both above investor expectations. The company also guided to free cash flow conversion of 90% of EBITDA.
UBER remains the undisputed global leader in ride sharing, with a greater than 50% share in every major region in which it operates. The company is also a leader in food delivery, where it is number one or two in the more than 25 countries in which it operates. Moreover, after a history of losses, the company is now profitable, delivering expanding margins and substantial free cash flow. We view UBER as more than a ride sharing and food delivery service; we also see it as a global mobility platform with 142 million users (by comparison, Amazon Prime has 200 million members) and the ability to penetrate new markets of on-demand services, such as package and grocery delivery, travel, and hourly worker staffing. Given its $5.4 billion of unrestricted cash and $4.8 billion of investments, the company today has an enterprise value of $165 billion, indicating that UBER trades at 21x our estimates of next year’s free cash flow.”
