Investment thesis for Uber

An assessment as of 11/9/2024

I recently opened an investment position in Uber after their Q3, 2024 earnings report. My initial assessment of this investment is that it is a fairly valued but has great potential synergistic growth opportunities looking forward into the next few years.

An overview of Uber

Uber separates their business into 3 segments: Mobility, Delivery, Freight.

• Mobility is the segment around ridesharing but also includes a variety of other services such as carsharing, rentals, etc associated with transportation. This segment makes up the bulk of revenue 6.4 billion, ~57% of total and also grew the fastest year over year (YoY) at 26% in the 3 months of Q3, 2024.

• Delivery is the segment around delivery of goods with the most well known component as Uber Eats. This segment makes up 3.4 billion of revenue, ~ 31% of total and grew 18% YoY in the 3 months of Q3 2024.

• Freight is the segment around supply chain logistics. This segment makes up the smallest percentage of revenue at 1.3 billion and also grew the slowest at only 2% YoY in Q3 2024.

Valuation of Uber

Uber is both cashflow positive and earnings positive. I expect their current rate of high growth to continue for at least the next few years. A discounted cash flow analysis (DCF) based on TTM free cash flow of 5.957 billion as of the Q3 earnings report assuming the following:

• 9% discount rate

• Year 2-4 growth rate: 18%, Year 5-6 growth rate: 10%, Longterm growth rate: 4%

suggests a fair stock price of $74.82 which is close to the market close value of $72.02 as of 11/8/2024.

Using an earnings per share (EPS) approach, Uber has TTM EPS of $2.02. Assuming the following:

• EPS growth rate of 30%

• PE of 30

suggests an intrinsic value of the stock at $78.78.

Rationale for investment in Uber

Despite the valuation of Uber being fairly close to fair valuation using either method, I believe the Uber investment has potential to be a better than average investment for a number of reasons:

• Most important: Uber is ideally set to take advantage of the robo taxi and autonomous driving trend. After the recent US election results and the planned role of Elon Musk in the government, I expect significantly faster uptake of robotaxi and autonomous driving. Uber with its global presence and app is ideally suited to partner with various EV companies to synergistically take advantage of this and has already begun to do so with Waymo. This could lead to a whole new source of revenue potentially exponentially increasing the rate of growth.

• Management has affirmed plans to return capital in the form of stock buybacks which is a tax efficient way to return capital to investors starting in 2025. This will hopefully also reduce total share count which has been increasing up to this point with 2.1 billion shares outstanding in this last quarter and lead to an additive benefit in earnings per share growth

• Overall economic environment looks positive in the next 2 years and companies focused on service/travel like Uber should benefit disproportionately.

Disclaimer: Any information contained here is not intended as, and shall not be understood or construed as, financial advice. I am not a financial advisor and this is only a documentation of my personal investment journey and decisions. You should always do your own research before making any final decision on investments.