Coming out of the COVID Pandemic, UBER is seeing increased traction as its latest Q3 results showed improving end markets performances. For the third quarter, mobility gross bookings not only saw growth of 67 percent Y-o-Y, but it also improved sequentially, growing by 14 percent quarter on quarter. Airport trips have seen a rising trend and has led to adjusted EBITDA for the division to rebound to the positive side reported at 5.5 percent. This shows the mobility is experiencing traffic returning to the normalcy of pre-Covid levels, which bodes well for the division’s profitability. The opportunity seems ripe for UBER to benefit from the non-restaurant food delivery business by attaining revenue from advertising from those platforms.
But Uber has focused on cutting costs and, during the pandemic, building up a then-nascent food-delivery division, which has since become a major revenue driver. Uber’s ride-hailing service, meanwhile, has gradually bounced back and the numbers from the fourth quarter suggest both are trending in the right direction. The development of autonomous vehicles, and especially Google’s Waymo, could eliminate the need https://g-markets.net/ for all existing ride-share platforms, driving Uber and Lyft out of business. While the FCF figure can definitely be something that excites shareholders, in my opinion, what makes Uber an intriguing investment candidate is just how essential it has become to the daily lives of millions of people. It’s hard to imagine what life was like before Uber existed, as its services are so ingrained in our society today.
The transportation-as-a-service business is experiencing strong momentum right now following impressive financial results. But the stock is trading at roughly the same levels it was at when it went public in May 2019. Does this present investors with a good opportunity to buy Uber shares right now? Let’s take a closer look at the popular ride-hailing and food-delivery enterprise.
- It’s hard to imagine what life was like before Uber existed, as its services are so ingrained in our society today.
- In the most recent quarter (the second quarter of 2023, which ended June 30), Uber’s revenue of $9.2 billion was 14% higher than in the year-ago period.
- Founded in 1993, The Motley Fool is a financial services company dedicated to making the world smarter, happier, and richer.
- While earnings growth is arguably the most superior indicator of a company’s financial health, nothing happens as such if a business isn’t able to grow its revenues.
- As of this writing, shares trade at a price-to-sales ratio of 2.8, which is below the historical average of 4.5.
Uber faces intense competition in the United States from Lyft LYFT, which has gained market share. In addition, it remains possible that Lyft out-innovates Uber to emerge as the top ride-hailing provider. There are also concerns about whether the firm’s network effect can remain an economic moat source if it is forced to incur additional costs imposed through regulations at the municipal, state, and/or federal levels.
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Uber Earnings Crush Estimates as Bookings Jump
In other cases, Europe’s top court in 2017 had ruled that UBER was to be treated as a transport service provider, thus it had to follow local taxi regulations. In the UK, UBER was forced to recognize drivers as workers, and therefore had to give drivers some benefits such as holiday pay. Uber and other ride-share companies struggled through the COVID-19 pandemic.
The business can offer targeted promotions and discounts to spur demand where it sees fit, leading to higher activity on the platform. Uber gathers data from riders and drivers, learning about the location and timing of ride requests. As it does so, the firm can get a clearer picture of users’ tendencies. Combined with the user-generated driver ratings, we think such information helps Uber improve the timeliness of matching riders with drivers. Such overall enhancement in service could help the firm strengthen its network effect by increasing users and ride requests per user, which helps it gather additional data, possibly further increasing the overall value of the data. Uber’s management team has worked hard to swing the company into profitability while maintaining strong growth in its ride-hailing and food-delivery businesses.
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For example, Uber may be forced to conduct more thorough background checks on all driver applicants, such as adding costlier fingerprinting to the driver application process everywhere in the United States. Such concern is also an ESG risk related to human capital, as a lack of enough background checks may put riders at risk and lessen the quality of the firm’s services. At the same time, gathering more driver and rider data may increase the firm’s ESG risks around data privacy and security.
The idea is to acquire lots of customers fast and eventually cut costs down the road to turn the business profitable. Since Uber has 142 million monthly active customers on its platforms, it will be the go-to network for developers of autonomous vehicles who want to access the largest possible audience. It recently launched Group Rides in 100 cities globally, which means friends traveling to the same destination can book one ride to pick them best forex calendar up, even if they are in different locations. The company also expanded its Taxi segment in New York City, so any customer who books an UberX can have the ride fulfilled by a yellow cab. Uber disrupted the traditional taxi industry when it burst onto the scene, and now it stands to profit from what’s left. As recently as the end of November 2021, UBER was ordered by the Belgium court to shut its operations in Brussels and most of Belgium.
Plus, CNBC’s Bob Pisani shares investing insights from 25 years on the floor of the New York Stock Exchange. The leader in ride-hailing offers everything a growth-minded investor could want in a stock. The ride-sharing platform is finally profitable, and its stock is up 185% since the start of 2023. Investors should remain focused on Uber’s long-term potential as a business, and they should pay especially close attention to autonomous self-driving technologies, which could be a major value creator in the coming years. While that will drive short-term demand for Uber stock, there is no guarantee that S&P 500 inclusion will lead to a higher valuation in the long term.
Key Morningstar Metrics for Uber Technologies
UberX expanded to 35 cities within a few months, demonstrating its popularity among cost-conscious riders. In August 2014, Uber extended its services by introducing Uber Eats, a food delivery platform. It also unveiled a carpooling feature in the San Francisco Bay Area, which soon spread to other cities globally, enabling passengers to share rides and save on fares.
While the firm may have to concede and implement such policies, it will also likely take an overall higher percentage from the gross revenue generated per ride, as its price is likely to remain competitive with Lyft’s. Lack of adequate compensation and/or benefits also constitutes a human capital ESG risk, in our view, as it can lead to drivers jumping to other platforms and reversing the network effect. We note that both Uber and Lyft are likely to demand higher take rates.
The consensus earnings estimate of $1.08 for the current fiscal year indicates a year-over-year change of +24.1%. Despite the controversies, Uber has committed to carbon neutrality globally by 2040, and by 2030, in most countries, rides will move exclusively to electric vehicles. The company has also formed various partnerships and acquisitions, such as with IT Taxi in Italy, Cornershop for grocery delivery and Postmates for alcohol delivery. Uber continues to expand its services and develop new offerings, such as Uber Works, Uber Green and Uber Eats.
Delivery is the next division of UBER which is seeing considerable growth and could prove to be the next leg of expansion for the company. Delivery Gross Bookings saw a growth of 50 percent year on year with it achieving almost a breakeven in terms of adjusted EBITDA (-$12m). The turnaround in the environment and the subsequent vaccine-led rally (which has helped the market including UBER) is still keeping investors underwater on their purchase, but now might be the time to load up. Delivery revenue grew 6%, and revenue for the ride-share part of the business climbed 34%. Create a free account to gain access to news, analysis, and real-time alerts on the stocks you follow. Get stock recommendations, portfolio guidance, and more from The Motley Fool’s premium services.
