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I am bullish on Uber, due to its potential to continue generating rapid growth at a reasonable price. (See UBER stock charts on TipRanks)
Strengths
Uber makes money by pairing consumers with drivers and restaurants.
Its competitive advantage stems from its massive user base across its large network, which encourages more people to sign up. This virtuous cycle of growth has propelled the company forward since officially launching in 2011.
Recent Results
Uber is on track to grow tremendously over the next few years. Revenue is expected to increase by 44.5% in 2021, and 39.9% in 2022.
Uber also recently announced its financial results for the second quarter of Fiscal Year 2021. Gross bookings grew 114% year-over-year to $21.9 billion.
Growth was driven by a 184% increase Mobility Gross Bookings, which reached $8.6 billion, while Delivery Gross Bookings grew 85%, hitting $12.9 billion.
Uber is making progress by investing in drivers and employees, to improve the quality of the company. Management believes these strategic investments have generated a measurable increase in monthly active riders, couriers, and consumers.
Valuation Metrics
Uber’s stock price hasn’t moved much since its 2019 IPO.
Even still, the business has continued to grow rapidly, and is not as overvalued as it was at its IPO.
Its enterprise value to forward revenue is a very reasonable 4.02x. While its EV/2022 EBITDA appears rich at 49.4x, it is important to keep in mind that for a rapidly growing company, this is fairly reasonable.
Wall Street’s Take
From Wall Street analysts, UBER earns a Strong Buy consensus, based on 22 Buy ratings, and two Hold ratings assigned in the past three months.
Additionally, the average UBER price target of $68.73 puts the upside potential at 66.1%.
Summary and Conclusions
Uber enjoys early mover, name brand, and significant network competitive advantages in its ride sharing and food delivery businesses, positioning it to thrive as a leading mobility company in the future.
Additionally, its valuation is quite reasonable, as the company has grown into its rich IPO valuation. Once the company becomes profitable in the next year or two, we expect the stock price to move higher, as the market begins to realize its cash-generation capabilities.
It might be an interesting investment at current prices.
Disclosure: On the date of publication, Samuel Smith had no position in any of the companies discussed in this article.
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