It seems a longtime since Uber Technologies, Inc. was just another random start-up competing in the newly emerging Mobility-as-a-Service (MaaS) industry.
Fast forward to today, however, and the company now operates a multi-product platform under one single, well-known and overarching brand, with business opportunities in the food delivery, freight transportation and advertising revenue spaces.
But it’s not been a particularly good 12 months for the ride-hailing firm. Uber’s share price closed 30% down from its 2021 highs of over $60, and, already, the firm has lost 17% of its value from the beginning of the year.
So, what’s the forecast for UBER – and will its fortunes improve this year?
UBER Financials Are Really Good
The most perplexing thing about Uber’s recent price action is the fact that the company’s performance on the financial front has been pretty good of late. For instance, Uber recorded a year-on-year revenue increase of 83% at $5.8 billion for the Fourth Quarter 2021, while its gross bookings grew 51% annually to $25.9 billion.
What should be especially pleasing for investors is that the company’s Uber Eats division posted its first ever positive EBITDA at +$25 million. This came off the back of segment revenue of $2.4 billion, which beat expectations and was up 79% year-on-year. Uber Eats’ bookings were also up 34% at $13.4 billion.
All of this is all excellent news, not just because analysts were skeptical about the prospect of Uber Eats ever becoming profitable, but because these developments point to the importance of Uber Eats as a growth driver for the business long-term.
Indeed, Uber Eats was a bigger revenue generator during the height of the COVID-19 pandemic than its normally more lucrative ride business. Remarkably, this was true again this quarter, with mobility trailing at just $2.3 billion of sales – a reality that underlines just how critical this wing of the company will be in the future.
Another important turnaround came with the announcement of the company’s overall total earnings. UBER reported an adjusted EBITDA operating loss of -$454 million in Q4 2020, but managed to reverse this trend in 2021, bringing in an improved +$86 million.
Uber put out guidance last November with the expectation that it could deliver an adjusted EBITDA of between $25-$75 million – which makes its actual realized figure all that more exceptional, especially since it also beat Wall Street’s consensus estimate of $67 million by 28% as well.
Despite all this, Uber’s share price has fallen since the release of its Q4 numbers. One of the reasons for this is that, even though they looked good on the surface, many of its financial metrics came in under what analysts had originally expected. For example, those gross bookings of $25.9 billion were actually 1% shy of what Wall Street wanted to see – a transgression for which the market decided to punish rather severely.
UBER Is The Stand Out Winner
Uber Competition: At 69% of the ride-hailing market in the US, Uber is the clear winner when it comes to claiming industry dominance of the MaaS sector. Its closest competitor, Lyft, accounts for just 31%, with almost no other rivals on the horizon at all.
The delivery business is a little trickier, with other more mature players in the space attempting to take the lead on Uber. Here, Uber’s 22% is eclipsed by Door Dash’s 55%, and unlike in the mobility segment, there are plenty of other companies vying for a slice of the pie.
Grubhub just trails Uber at 17% of market share in 2021, with Postmates taking 5% as well. However, UBER bought-out Postmates in 2020, which should reinforce its delivery efforts going forward.
Will Inflation Crush UBER?
It’s always been known that Uber operates on a high-volume, low-margin basis, which, in times of rising inflation, could mean disaster for the company. With interest rates having been low for most of Uber’s existence, any change to this status quo – which appears increasingly likely – could have profound effects on its ability to do business and achieve profitability.
Furthermore, Uber seems to be in a never-ending battle with regulatory bodies over the exact legal status of its large army of workers. To give just one example, the European Commission looks set to enshrine rules which will recognize its drivers and couriers as “employees“ – rather than independent contractors – conferring on them certain privileges, such as the right to a minimum wage and sickness and holiday pay.
The degree to which Uber has fought these changes implies the cost to the company will be substantial. The fight isn’t over yet, but if it goes the wrong way for Uber, there’s no doubt its share price will be negatively affected.
Uber has actually gone some way to minimizing its risk profile recently. Instead of pursuing costly and cash-heavy start-up projects, the firm decided to divest many of its less profitable entities, after which it then acquired a new stake in whatever company took over the enterprise.
It did this with Uber Elevate, its flying taxi business, as well as Advanced Technologies Group, the autonomous driving unit which it sold to Aurora in 2021 for $4 billion. By taking this approach, Uber is able to free up extra liquidity, concentrate on its core offerings, and benefit if these other projects do become successful over time.
Uber Stock Forecast: Is UBER a Buy or Sell?
Uber is growing its product suite. The company is in the process of introducing a number of new core offerings, including Uber One, Uber Rent and Uber Reserve. Because of this, the company has excellent opportunities to cross-sell these products to its already established customer base.
At the moment, its fraction of users who are “cross-platform” is just 17%, but this will continue to grow. The typical cross-platform user accounts for gross bookings of $364, whereas a customer who only uses its mobility service accounts for just $58.
Expansion and recovery is key for UBER. Penetration, even in its largest markets, is still low, but it also sees “a massive TAM in emerging economies” too. With 83% revenue growth, 19 million trips a day – which is close to pre-pandemic levels – and delivery now making a profit, UBER is a definite buy, especially at these highly-depressed prices.
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