The Bull Case For Uber Stock

Since Uber’s inception, the company has been at the forefront of the ridesharing conversation. Many competitors have come and gone, but few have stood toe to toe against Uber (Didi and Lyft are the two standout exceptions) even though Uber has had its fair share of struggles internally over the years.

Given the company’s dominance and its cultural prevalence, it’s no surprise that there is a strong bull case for Uber, but what is it? 

Uber’s Financials: Positive EPS on Horizon

For the first quarter of 2021, Uber (UBER) managed to pull off a feat some financial analysts thought was a low probability: Uber “nearly” broke even.

It improved its quarterly net losses from almost $700 million for the fourth quarter of 2020 to only $100 million for the first quarter of 2021. That’s still a net loss of $108 million, to be exact, but that also means that Uber gained ground to the tune of nearly $600 million in the first quarter alone.

On an earnings per share (EPS) basis, analysts estimated to see -0.54 for Uber’s first quarter — Uber surprised everyone by reporting only -0.06 EPS. This massive improvement from quarter to quarter has bullish investors feeling incredibly positive about the company’s stock.

And what’s as bullish as a glimpse of earnings turning positive soon is a forecast for significantly higher revenues over the coming fiscal year.

Positive Uber’s Mobility and Delivery Synergies 

Another ingredient into the bull case for Uber stock is the company’s domination of two separate industries: mobility and delivery.

Users can call an Uber to come pick them up, or call an Uber to bring them food through Uber Eats. What’s more, according to its Q1 earnings call, the separate divisions of the company have seen synergies between the two: About 13% of new Uber Eats users discovered the food delivery service through the mobility division of the company.

While Uber’s mobility has certainly taken a hit as a result of COVID-19, bullish investors are confident that this will eventually subside and the company will recover.

Uber Gig Employees Vs Full Time Employees

Perhaps more than any other issue on the table, Uber has had to deal the most with talks of changing the definition of a gig employee and ensuring their contract workers receive proper benefits like an hourly or salaried employee would receive.

As it stands now, Uber drivers are categorized as contract workers without any sort of additional benefits like health insurance or retirement plans.

Bullish investors have faith in Uber’s strategy to keep gig employees working as gig employees, holding firm to the fact that Uber drivers enjoy the flexility and freedom of being a gig employee over an hourly or salaried employee.

Uber Market Share Is Dominant

The bull case for Uber also relies quite heavily on Uber’s remarkable market share. Even with its financial losses quarter after quarter, Uber continues to dominate the ridesharing industry: As of June 2021, Uber controlled 68% of the rideshare industry in America, while Lyft accounted for only 32%.

Across all 50 states, Uber is the preferred ridesharing app, and 61% of rideshare app users are loyal to Uber alone. Bullish investors know that, no matter how much its net loss is each quarter, Uber remains on top of the game.

Autonomous Driving To Save Costs?

A large part of Uber’s improved quarterly losses has to do with its increased focus on autonomous driving.

Through Aurora Innovation Inc, a company specializing in autonomous driving technology, Uber hopes to one day implement autonomous drivers.

While this might be a long way off, especially when it comes to autonomous driving in busy, complicated areas like city streets, Uber is still putting billions into this concept and seeing some real success so far.

A win in this category would be highly disruptive and could have dramatic implications on Uber’s financials. Autonomous driving cars will have their own logistical challenges but reduce labor costs could be a boon to Uber’s gross margin.

After all, Uber pays out 75-80% of each fare to drivers. By charging the same fare but capturing that as a revenue, Uber has a lot of financial wiggle room to manage its fleet of autonomous cars.

Uber’s Investments Diversify Revenues

Uber is best known for ridesharing and food delivery, but the company also has its own fair share of investments on the side.

Uber has stakes in Lime scooters, Jump bikes and scooters, Careem cars-for-hire, Postmates, and Zomato, among its investments in Aurora Innovation Inc. and other companies related to its autonomous car research.

Uber also has a substantial stake in package delivery, courier services, and freight transportation.

Those scrutinizing Uber, albeit with rose-tinted glasses, appreciate its willingness to branch out outside its own mobility and delivery divisions, and have a lot of hope in these smaller investments under the Uber umbrella. They also feel that all these investments are completely logical, with each one pertaining to either mobility or delivery.

Uber’s New Profitability

When looking at Uber’s EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization), financial analysts can clearly see that the company will finally be profitable by the end of 2021.

This is exactly how Uber’s higher-ups forecast financial statements, as well: With each quarter shrinking that net loss margin a little bit more each time, it’s not too far-fetched for bullish investors to argue that, eventually, Uber’s going to cross that threshold and truly become profitable sooner rather than later.

When this happens, not only will bullish Uber investors be vindicated, they’ll likely see some bearish investors come over to their side, as well.

The Bottom Line: What Is the Bull Case for Uber Stock?

No matter what city you’re in — whether you’re in America or the United Kingdom or Asia or Australia or any of the other 69 countries and 900 metropolitan areas that Uber operates in — you’re likely to find a ride or a food delivery driver through Uber.

With nearly 100 million monthly active users globally, a 71% market share for ridesharing across the world, and a 22% market share for global food delivery, Uber is easily one of the most relevant and trusted brand names around today. Investors arguing the bull case for Uber stock know this better than anyone.

Reviewing this bull case, you can see that Uber’s financials are on the rise and anticipate EBITDA profitability by the end of this fiscal year. The company continues to dominate mobility and delivery. It expects to work through any upcoming legislation that challenges the gig economy.

It has a massive market share, with no competitor even coming close to its piece of the pie – except for Didi in China. Lyft has about half the market share capture as Uber.

Lastly, it continues to invest money in automated driving, as well as a slew of other smart investments pertaining to mobility and delivery. With all this in mind, it’s not hard to see why bullish investors feel so strongly about Uber: Come what may for the company, it’s still the best in the ridesharing and delivery business and look to be staying that way for the foreseeable future.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.