7. Uber Technologies Inc. (NYSE:UBER)
Number of Hedge Fund Holders: 136
Year-to-Date Performance as of February 17: 31.66%
Uber Technologies Inc. (NYSE:UBER) develops and operates technology applications that connect consumers with transportation, delivery, and freight services globally. Through its Mobility segment, it offers ridesharing, rentals, and other transportation options. The Delivery segment connects consumers with restaurants and retailers for food and other item delivery. The Freight segment provides a digital marketplace connecting shippers and carriers.
Its mobility segment, which is its ridesharing business, drives its stock performance. Strong Q4 2024 results, which included exceeding earnings estimates and generating $44 billion in revenue, have fueled investor enthusiasm. The company’s partnership with NVIDIA to integrate AI into its autonomous vehicle platform signals its commitment to innovation. Expanded AI tools for Uber Eats and a substantial stock buyback program demonstrate initiatives to enhance growth and shareholder value. Billionaire investor Bill Ackman’s large investment in Uber Technologies Inc. (NYSE:UBER) has also boosted market confidence.
The company’s progress in the AV space, particularly its partnership with Waymo, positions it well for the future of transportation. Despite competition, its established network and operational expertise provide a significant advantage. Loop Capital recently raised its price target to $89 from $86 on February 12, maintaining a Buy rating. Uncertainty around robotaxis may limit near-term valuation, but 2025 evidence will likely show that scaled commercialization is years away. Loop believes that the company’s position with multiple AV suppliers makes it a key beneficiary as a demand generator.
Earlier last year, 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.”
