Bull of the Day: Uber Technologies, Inc. (UBER)

Uber Technologies, Inc. (UBERposted its first full-year profit as a public company in 2023 by expanding its ride-hailing and delivery businesses while streamlining its operations at every turn. 

Wall Street rewarded Uber by sending its stock to new all-time highs in February, soaring 130% over the last 12 months.

Uber shares have cooled off to trade at attractive levels for long-term investors given its impressive outlook in businesses it transformed from niche apps for people in select cities into a $50 billion-a-year behemoth.

A Transformational 2023

Uber posted fourth-quarter profit of $1.43 billion, including a $1 billion benefit from its equity investments. The ride-hailing firm reported $652 million of income from operations vs. a loss of $142 million in the fourth quarter of 2022. Uber’s Q4 operating income also surged by $258 million quarter-over-quarter.

On top of that, Uber’s Q4 free cash flow hit $768 million vs. a negative cash flow of -$303 million in the final quarter of 2022. This came after Uber posted its first-ever quarterly operating profit in the second quarter of last year.

CEO Dara Khosrowshahi called 2023 an “inflection point” proving Uber can “continue to generate strong, profitable growth at scale.”

Uber spent the last several years cutting jobs and streamlining its operations, always pivoting toward profitable expansion amid a wild ride for its business that saw ride-hailing briefly fade during Covid and food delivery soar. The company’s strength in its core mobility and delivery segments are offsetting struggles in its much smaller freight unit.

Zacks Investment Research
Image Source: Zacks Investment Research

Uber’s results over the last several years highlight that people are back to living their pre-pandemic lives in full force. Crucially, the resurgence of its ride-hailing segment hasn’t come at the expense of delivery, showcasing the strength of its two core business models that are especially popular with higher-income consumers who are less impacted by lingering inflation and various economic cycles.

Uber grew its monthly active platform consumers by 15% YoY in the fourth quarter to 150 million, fueled by growth across mobility (ride-hailing) and delivery. Total trips soared 24% YoY to 2.6 billion in Q4, while mobility gross bookings jumped 29% YoY to $19.3 billion and delivery surged 19% to $17 billion.

Uber, under Khosrowshahi, has focused heavily on disciplined spending and cost-cutting measures. Uber offers far fewer discounts to consumers and incentives to drivers these days. Uber is reducing delivery errors and becoming more efficient while boosting its market share vs. rival Lyft (LYFT) and others.

Zacks Investment Research
Image Source: Zacks Investment Research

On top of that, Uber is rolling out more advertisements across its core Uber app, Uber Eats, and beyond to help monetize its growing customer base for ride-hailing and delivery. Uber also heavily scaled back on its in-house autonomous vehicle dreams in favor of a strategic partnership with Waymo for self-driving ride-hailing.

Uber in December announced a new partnership with autonomous trucking firm and independent subsidiary of Daimler Truck AG, Torc Robotics. Uber is prepared to compete against or possibly with the likes of Tesla (TSLA) and others in the autonomous ride-hailing, delivery, and freight space down the road.

Growth Ahead

Uber grew its revenue by 17% in 2023, even as it came up against an impossible to compete against stretch of 83% sales growth in 2022 and 56% in 2021. The ride-hailing company is projected to post another 16% growth in 2024 and 2025 to hit $50.49 billion next year—vs. $13 billion in pre-Covid 2019.

Its total gross bookings are projected to surge 19% in 2024, based on Zacks data. Meanwhile, its monthly active platform consumers are expected to climb 13% to 169 million.

Zacks Investment Research
Image Source: Zacks Investment Research

Uber swung from an adjusted loss of -$4.65 a share in 2022 to +$0.87 per share last year. The company is expected to post 40% adjusted EPS growth in 2024 and another 67% in FY25 to reach $2.04 per share.

Uber crushed our Q4 EPS estimate by 340% ($0.66 vs. $0.15). Its consensus FY24 EPS estimate has climbed by 97% over the last year, with its outlook for FY25 up 20%. The firm’s overall upbeat EPS revisions help it grab a Zacks Rank #1 (Strong Buy) right now.

Other Fundamentals

Uber stock has soared around 130% over the last year to break above its 2021 highs to a record of around $82 a share in mid-February. During the same stretch, its rival Lyft climbed 60%, future possible robot taxi rival Tesla moved 7% higher, and tech popped 40%.

Uber is now up 70% over the last five years vs. Lyft’s 70% downturn. The stock has pulled back from its highs, trading 14% below its records and 23% below its average Zacks price target.

Uber is currently trying to find support at its 21-week moving average, where the S&P 500 and the Nasdaq found support to start the week. Uber fell from its most overbought RSI levels in February to neutral.

Zacks Investment Research
Image Source: Zacks Investment Research

Uber’s valuation is improving. The stock trades at a 50% discount to its highs at 3.2X forward sales and 30% below the Zacks tech sector. Plus, its PEG ratio, which factors in its longer-term earnings growth outlook, sits at 0.9 vs. tech’s 1.8.

Bottom Line

Some investors might want to wait until after Uber reports its first quarter 2024 financial results on May 8 before they consider buying the stock.

Long-term investors are often well served to forget the market timing game. Plus, Wall Street loves the stock, with 34 of the 40 brokerage recommendations Zacks has at “Strong Buys,” alongside no “Sells.”  

Buy 5 Stocks BEFORE Election Day

Biden or Trump? Zacks is releasing a FREE Special Report, Profit from the 2024 Presidential Election (no matter who wins).

Since 1950, presidential election years have been strong for the market. This report names 5 timely stocks to ride the wave of electoral excitement.

They include a medical manufacturer that gained +11,000% in the last 15 years… a rental company absolutely crushing its sector… an energy powerhouse planning to grow its already large dividend by 25%... an aerospace and defense standout that just landed a potentially $80 billion contract… and a giant chipmaker building huge plants in the U.S. 

Don’t Wait. Download FREE >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Tesla, Inc. (TSLA) : Free Stock Analysis Report

Lyft, Inc. (LYFT) : Free Stock Analysis Report

Uber Technologies, Inc. (UBER) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

More Related Articles

Info icon

This data feed is not available at this time.

Sign up for the TradeTalks newsletter to receive your weekly dose of trading news, trends and education. Delivered Wednesdays.