We came across a bullish thesis on Uber Technologies, Inc. (UBER) on Rijnberk InvestInsights’s Substack by Daan Rijnberk. In this article we will summarize the bulls’ thesis on UBER. Uber Technologies, Inc. share was trading at $70.11 as of Sept 11th.
Uber’s stock, while reaching an all-time high of over $80 earlier this year, has seen a modest 12% gain in 2024, aligning with the broader market. Despite this, Uber’s business is thriving and surpassing many expectations. The company has achieved impressive top-line growth, consistently increasing revenue by high-teens to low-twenties percentages, and is now generating EBITDA in the 40% range. This strong financial performance is complemented by GAAP profitability and accelerating free cash flow (FCF), underscoring Uber’s successful operational strategy and market dominance.
A close up view of a hand holding a smartphone, using a ride sharing app.
In the global ride-hailing market, Uber stands out as the clear leader with a substantial 25% market share, overshadowing competitors like Lyft, which holds only 8%. Uber’s financial robustness and expansive market presence create a significant competitive advantage, allowing it to maintain attractive pricing and availability. This dominance is reflected in its $30 billion brand value, marking a 28% year-over-year increase, and its growing footprint in the global taxi network. The ride-hailing industry’s projected 13% compound annual growth rate (CAGR) bodes well for Uber, which is expected to continue outpacing this growth, sustaining mid- to high-teens growth rates.
In the delivery sector, Uber faces competition from major players like DoorDash and various European companies but remains at the forefront in seven out of its top ten markets. The company’s continued market share gains and the projected 9% CAGR for the delivery industry suggest Uber’s ability to achieve double-digit growth in this segment as well. With significant room for expansion and a burgeoning advertising business now generating over $1 billion in revenue, Uber’s growth prospects are promising.
Uber’s impressive Q2 results highlight its operational success, with trip growth at 21% year-over-year and gross bookings increasing by 19% to $40 billion. Both the mobility and delivery segments have shown strong performance, with adjusted EBITDA climbing 71% to $1.6 billion, reflecting substantial margin improvement.
Despite facing economic uncertainties and recession fears, Uber’s management maintains a confident outlook, projecting continued robust growth. The current valuation, with an EV/EBITDA multiple around 24x, reflects the company’s potential. With a target price of $80 based on an expected 10x multiple, Uber’s shares offer attractive returns, with over 12% annual growth potential from the current price of $69. For long-term investors, Uber’s growth trajectory and solid financial position make it a compelling buy, especially if the stock dips to the $60-$65 range.
Uber Technologies, Inc. is on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 145 hedge fund portfolios held UBER at the end of the second quarter which was 130 in the previous quarter. While we acknowledge the risk and potential of UBER as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher 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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Disclosure: None. This article was originally published at Insider Monkey.