6. Uber Technologies, Inc. (NYSE:UBER)
Value of Appaloosa Management’s 13F Position (9/30/2024): $106 million
Number of Hedge Fund Shareholders (9/30/2024): 137
Ride-hailing and delivery platform Uber Technologies, Inc. (NYSE:UBER) closes out the first half of David Tepper’s top ten long-term stock picks, with the billionaire money manager owning a stake in the company since Q2 of 2021. Overall hedge fund ownership of UBER has remained remarkably consistent throughout that three-plus year period, coming in at 139 13 quarters ago and 137 in the latest quarter.
Uber Technologies, Inc. (NYSE:UBER) shares have stalled this year as investors appear to be taking a breather from the stock to allow it to grow into its lofty valuation, which still stands at 28.9x earnings. And while Uber has diversified its income streams in recent years, most notably with delivery services, there is still long-term concern about the company’s place in a perhaps-not-too-distant future where autonomous vehicles are criss-crossing the globe in perfect driverless harmony.
In the meantime, Uber is expected to grow at an impressive near-term rate, with a projected CAGR on the revenue front of 17% between 2024 and 2026, while EBITDA growth will be even more robust at 30%.
And not every market analyst is convinced of Uber’s impending doom under the tires of a fleet of merciless robotaxis. Oppenheimer considers UBER a top stock pick for 2025 and points out several major hurdles facing robotaxis, most notably the excessive costs of up to $40 billion to build and maintain a fleet of them. The firm even opines that robotaxis could actually increase Uber’s addressable market ever so slightly, by pushing the company to drive deeper into consumer car expenses. Oppenheimer has an $85 price target and ‘Outperform’ rating on UBER shares.
The RiverPark Large Growth Fund broke down Uber Technologies, Inc. (NYSE:UBER)’s impressive market reach in the fund’s Q4 2023 investor letter:
“Uber Technologies, Inc. (NYSE:UBER): UBER was a top contributor in the quarter following better than expected 3Q23 earnings and 4Q23 guidance. Gross bookings of $35.3 billion were up 21% year over year. Mobility gross bookings of $17.9 billion grew 30% over last year driven by a combination of product innovation and driver availability. Delivery gross bookings of $16 billion were up 16% from last year and continued to be strong throughout the quarter. 1Q Adjusted EBITDA of $1.1 billion, up $576 million year over year, was better than management’s guidance of $1 billion, and the company generated $900 million of free cash flow, up from $358 million last year. Management guided to continuing growth in 4Q Gross Bookings (23.5% growth) and Adjusted EBITDA (of $1.2 billion).
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.1 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 $5.2 billion of unrestricted cash and $5.1 billion of investments, the company today has an enterprise value of $128 billion, indicating that UBER trades at 21x our estimates of next year’s free cash flow.”
