Investing in UBER: Evaluating the Case for Long-Term Growth

Renowned for its ride-hailing service, Uber Technologies, Inc. (UBER) has recently captured much of investors' attention. With its shares surging by an impressive 130% over the past year and almost tripling since the start of 2023, the company also hit a 52-week high of $82.14 last month.

Factors Driving Investor Interest in Uber's Shares

Throughout the tumultuous COVID-19 pandemic, ride-share giants such as UBER encountered formidable challenges. Compounded by continuous losses since its 2019 public debut, UBER faced a rocky road to financial stability.

Nevertheless, a significant turning point occurred last year when, for the first time, the company achieved annual profitability and earned its spot in the S&P 500 Index, meeting the Index’s criteria of positive earnings in the most recent quarters. These two milestones sparked a substantial surge in UBER’s share price.

During the fiscal year 2023, the company reported a 16.9% year-over-year increase in its revenue, amounting to $37.28 billion. Net income attributable to UBER came in at $1.89 billion and $0.87 per share versus a staggering net loss of $9.14 billion and $4.65 per share in the previous year, respectively.

Meanwhile, for the fourth quarter, UBER’s topline witnessed a 15.4% year-over-year jump, reaching $9.94 billion, higher than the analyst estimate of $9.76 billion. Its earnings per share of $0.66 was higher than $0.29 in the prior-year quarter and exceeded the analyst estimate of $0.17.

UBER’s strategic response to stay afloat during the pandemic included cost-cutting measures and a concerted effort to develop its emerging food-delivery segment, which has since evolved into a substantial source of revenue.

In the final quarter of 2023, the company’s Delivery segment posted approximately $3.12 billion in revenue, up 6.4% year-over-year. At the same time, the Mobility segment saw a notable 33.9% year-over-year increase.

Reflecting on UBER’s performance in the fourth quarter and the year 2023, CEO Dara Khosrowshahi emphasized the company's ability to sustain significant, profitable growth. He pointed out the expansion and heightened engagement of UBER’s audience, noting that the platform facilitated an average of nearly 26 million daily trips in 2023.

In the fourth quarter, the company’s gross booking saw notable year-over-year growth of 22%, amounting to $37.58 billion. UBER’s CFO, Prashanth Mahendra-Rajah, attributed the record engagement and accelerated gross bookings in the fourth quarter to the platform's advantages and disciplined investments in new growth avenues.

Further, for the first quarter of fiscal 2024, the management projects gross bookings to range between $37 billion and $38.50 billion, while adjusted EBITDA is expected to come somewhere between $1.26 billion and $1.34 billion.

Bottom Line

UBER has garnered significant attention from investors, propelled by its impressive revenue growth, heightened customer engagement, and notable profitability milestones. This remarkable resurgence from the challenges of 2020 underscores the company's resilience and adeptness in navigating difficult conditions.

In addition to its strong financial performance in its fourth quarter and full-year 2023 results, management’s confidence in UBER’s sturdy financial path is evident from the recent introduction of its inaugural share repurchase program, which allows for the repurchase of up to $7 billion of the company's common stock.

Meanwhile, Wall Street forecasts that UBER’s revenue and earnings per share of $43.34 billion and $1.24 for the fiscal year 2024 indicate an improvement of 16.3% and 42.4% year-over-year, respectively.

Furthermore, as the company gears up to reveal its fiscal 2024 first-quarter earnings next month, UBER remains one of the top choices according to J.P Morgan analyst Doug Anmuth, CFA.

Anmuth remains optimistic about UBER’s potential for ongoing execution and earnings growth, even after milestones such as profitability and S&P 500 inclusion have been attained.

With analysts expressing optimism regarding its earnings growth, UBER’s forward non-GAAP PEG of 0.80x, roughly 51.9% below the industry average of 1.67, indicates that the stock is reasonably priced.

UBER’s attractive valuation, impressive financial performance, and strategic initiatives have positioned it as a compelling investment opportunity with strong long-term growth potential in the ride-sharing and food delivery markets. As the company's first-quarter earnings release draws near, investing in UBER’s shares seems like a wise move for potential gains.