1) Uber Technologies, Inc. (NYSE:UBER)
Stock Price as of November 6: $74.36
Number of Hedge Fund Holders: 145
Uber Technologies, Inc. (NYSE:UBER) develops and operates proprietary technology applications in the US, Canada, Latin America, Europe, the Middle East, Africa, and Asia excluding China and Southeast Asia.
Uber Technologies, Inc. (NYSE:UBER)’s core business, the ride-sharing platform, should continue to benefit from the network effects and intangible assets in the form of user data. The company’s strategic focus on expanding in less dense, non-urban markets should drive trip growth, says an analyst from TD Cowen.
The company’s strategic initiatives, like the expansion of Uber One membership and its burgeoning advertising segment, should offer healthy avenues for future growth. Uber Technologies, Inc. (NYSE:UBER)’s approach to the burgeoning AV market should help the company in the long term.
The company has placed itself as a leading demand aggregator for AVs and has also expanded its collaboration with Waymo. This strategy enables the company to potentially benefit from AV technology without bearing the impact of development costs. The company continues to explore additional services and partnerships in a bid to diversify its revenue streams and capitalize on its existing user base. Its focus on operational efficiency and capital allocation, together with strong consumer engagement and delivery trends, places it well for sustained growth.
Analysts at Bank of America upped their price objective on the shares of Uber Technologies, Inc. (NYSE:UBER) from $88.00 to $96.00, giving a “Buy” rating on 23rd October. RiverPark Advisors, an investment advisory firm and sponsor of the RiverPark family of mutual funds, released the first quarter 2024 investor letter. Here is what the fund said:
“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.”
While we acknowledge the potential of UBER as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued 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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