Uber stock (NYSE: UBER) has rallied by almost 22% over the last month following the company’s better-than-expected second-quarter results. There appear to be quite a few tailwinds for Uber stock. Uber’s revenue growth has recovered nicely in the recent quarter, with sales rising 105% to $8.07 billion as the return of business and leisure travel helped the ride-sharing business, while the food delivery business holds up better than expected, even post the lockdown phase of the pandemic.
Over the last quarter, Uber saw gross bookings for its ride-hailing business grow 55% versus last year to $13.4 billion, as people return to offices and work. The number is also roughly 10% ahead of 2019 levels. Uber is also getting better at monetization, with its take rate – which is the percentage of its gross booking that it realizes as revenue – rising to 26.6% from 18.7% a year ago, potentially serving as an indicator of the company’s pricing power. Things might be getting better on the supply side as well, with the company noting that it has 5 million drivers on its platform, citing high inflation and the rising cost of living as reasons for new sign-ups. The strong demand growth and reduced investments into recruiting more drivers are also reflecting on Uber’s bottom line. Over the last quarter, Adjusted EBITDA stood at $364 million, beating the upper end of guidance of $270 million, while the company generated about $382 million in free cash flow.
Now, even post the recent rally, Uber stock remains down by about 31% year-to-date trading at about $28.50 per share. However, we think that Uber stock looks like a good value at current levels for a couple of reasons. Although the U.S. economy has been on a weak footing with GDP contracting over the last two quarters straight, consumers have been shifting in spending from retail to services, and this is broadly helping companies such as Uber. Consensus estimates for Uber Revenues stand at $31.5 billion for this year, marking a growth of about 80% versus 2021 and more than double the revenue the company posted prior to Covid-19. Margins have also been looking up, and it is possible that they could improve further as Uber pushes into areas such as digital advertising. Despite the growth and margin potential, Uber stock trades at under 2x consensus 2022 revenues, well below delivery rival DoorDash stock, which trades at almost 4x projected 2022 revenue. We value Uber stock at about $40 per share, marking a 40% premium over the current market price. See our analysis on Uber Valuation: Expensive or Cheap for more details.
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|S&P 500 Return||-3%||-16%||79%|
|Trefis Multi-Strategy Portfolio||-3%||-16%||236%|
 Month-to-date and year-to-date as of 8/30/2022
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