With Growth Picking Up, What’s Next For Uber Stock?

Ride-sharing major Uber stock (NYSE: UBER) has rallied by almost 35% year-to-date in 2023, outperforming the Nasdaq-100, which was up about 13% over the same period. There appear to be quite a few tailwinds for Uber stock.

Uber’s Q4 results, published last week, were stronger than anticipated. Revenues rose by 49% versus last year to $8.61 billion, as total trips on the company’s platform rose 19% to 2.1 billion. While the company benefits from the return of businesses and leisure travel,  the broader return to office trend, driver supply – which was a bottleneck through the early reopening – has also apparently picked up. Profitability is also clearly improving for Uber. Uber saw gross bookings for its ride-hailing business grow 31% versus last year to $14.89 billion. 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 27.8% from 20% a year ago, potentially serving as an indicator of the company’s pricing power. Profitability is also improving given the surge in the company’s top line and lower spending on attracting drivers. Uber’s food delivery business is also holding up better than expected, even post the lockdown phase of the pandemic with gross bookings up 6% versus last year. The strong demand growth and reduced investments in recruiting more drivers are also reflected in Uber’s bottom line. Adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) was up over 7x versus last year to $665 million.

Now, even post the recent rally, Uber stock remains down by almost 50% from all-time highs seen in 2021. We think that Uber stock looks like a good value at current levels for a couple of reasons. Consensus estimates for Uber Revenues stand at over $37 billion for this year, marking a growth of about 16% versus 2022 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 just 1.8x consensus 2023 revenues, well below delivery rival DoorDash stock, which trades at almost 3x projected 2022 revenue. We value Uber stock at about $42 per share, marking a 20% premium over the current market price. See our analysis on Uber Valuation: Expensive or Cheap for more details.

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[1] Month-to-date and year-to-date as of 2/14/2023
[2] Cumulative total returns since the end of 2016