1. Uber Technologies Inc. (NYSE:UBER)
Market Capitalization as of September 13: $150.32 billion
Number of Hedge Fund Holders: 145
Uber Technologies Inc. (NYSE:UBER) is a multinational transportation company that provides ride-hailing services, courier services, food delivery (Uber Eats), and freight transportation. Its platform has disrupted the transportation industry and is now a widely used service in many cities globally.
In the delivery space, Uber Technologies Inc. (NYSE:UBER) maintains a leading position in 7 of its top 10 markets. The company’s ongoing market share rise and the projected 9% compound annual growth rate for the delivery industry indicate its potential to achieve double-digit growth in the near future.
In the global ride-hailing market, it is the clear leader with a significant 25% market share. This dominance is evident in its brand value of $30 billion, reflecting a 28% year-over-year increase, along with its expanding footprint in the global taxi network. Hence, the ride-hailing industry’s anticipated 13% compound annual growth rate is a tailwind for Uber.
The company’s revenue grew by 15.93% year-over-year in Q2 2024 and reached $10.70 billion. There was a 21% year-over-year increase in trips and a 19% rise in gross bookings, which reached $40 billion. Both the mobility and delivery segments demonstrated strong performance as well. The advertising business now contributes over $1 billion in revenue.
The company is growing well by partnering with autonomous vehicle (AV) companies. As AV manufacturers face high costs, Uber Technologies Inc. (NYSE: UBER) offers valuable passenger transportation solutions. It is actively engaging with multiple AV firms to integrate their technologies into its platform, enhancing its market presence in the high-growth AV sector.
This is a top large-cap stock to buy now and is held by 145 hedge funds as of Q2 2024. The largest position is held by Altimeter Capital Management and is worth $982.2 million.
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.”
While we acknowledge the growth potential of Uber Technologies Inc. (NYSE:UBER), our conviction lies in the belief that AI stocks hold great promise for delivering high 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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