Uber Technologies, Inc. (UBER)

Equity
US
Technology

RISK

RETURN

Key risk factors

Strong trading liquidity

Moderate default risk

Average price volatility

Key return factors

Greatly overvalued vs peers

Very low or no dividends

Very poor margins and returns

Company profileUber Technologies, Inc. develops and operates proprietary technology applications in the United States, Canada, Latin America, Europe, the Middle East, Africa, and the Asia Pacific. It connects consumers with independent providers of ride services for ridesharing services; and connects riders and other consumers with restaurants, grocers, and other stores with delivery service providers for meal preparation, grocery, and other delivery services. The company operates through three segments: Mobility, Delivery, and Freight. The Mobility segment provides products that connect consumers with mobility drivers who provide rides in a range of vehicles, such as cars, auto rickshaws, motorbikes, minibuses, or taxis. It also offers financial partnerships, transit, and vehicle solutions offerings. The Delivery segment allows consumers to search for and discover local restaurants, order a meal, and either pick-up at the restaurant or have the meal delivered; and offers grocery, alcohol, and convenience store delivery, as well as select other goods. The Freight segment connects carriers with shippers on the company's platform and enable carriers upfront, transparent pricing, and the ability to book a shipment, as well as transportation management and other logistics services offerings. The company was formerly known as Ubercab, Inc. and changed its name to Uber Technologies, Inc. in February 2011. Uber Technologies, Inc. was founded in 2009 and is headquartered in San Francisco, California.

Valuation: Greatly overvalued

Multiple

TTM

NTM

P/E

97.90

75.70

PEG

2.90

P/B

12.30

9.60

P/S

3.50

3.20

P/FCF

32.40

-18.50

EV/EBITDA

51.10

-15.60

Considering past and projected metrics, the stock is distinctly 'expensive' compared to its peers. Specifically, the stock is expensive' on P/E, overvalued on EV/EBITDA, and reasonably priced on P/FCF.

Performance: Mixed

Over the last six months, the stock performance has varied, with an increase following a drop. The stock's price trend wasn't definitive when matched against its global counterparts from the same sector and industry (as depicted above). Over the past six months the stock has exceeded the performance of this peer group by 10ppts and its growth decelerated by 11ppts in the past month. This is equally valid for peers from the same country and industry. Given the stock's valuation versus its peers, its total price movement is neither favourable nor unfavourable.

Analyst view: Somewhat favourable

The average target price is 92 and suggests 45% upside potential. Usually, this means a BUY recommendation among investment firms, or a recommendation to increase one's position in this instrument in the next 12 months. The most optimistic analyst has a target price of 103.0. This translates into 62% upside potential in the best case. On the other hand, the most pessimistic analyst has a target price of 65.0. This suggests 2% upside potential. Even the most pessimistic analyst believes there will be stock growth.

Profitability: Very poor

RoE

Uber Technologies, Inc. reported a return on equity (RoE) of 12.5% in the last 12 months, down from 19.9% in FY23. The market consensus projects an RoE of 22.0% in FY24, this time above its peers.

RoA

Another important profitability metric, return on assets (RoA), amounted to 3.6% in the last 12 months, a decrease from 5.2% in FY23. The market analysts predict that RoA will be 6.4% in FY24, again weaker than its peers.

RoCE

In the last 12 months, the return on capital employed (RoCE) declined to 4.7%, below the peers. The consensus estimate for FY24 for RoCE is 6.4%, again behind the peers.

Net margin

EBITDA margin

Historically, UBER has reported very poor net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled 3.6%, down from 5.0% in FY23. The company has reported weak EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to 7.2% in the last 12 months, up from 6.0% in FY23.

RoIC / WACC = -0.3(fragile value creation)

The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been -0.3 in the past several years. This ratio implies a fragile shareholder value creation.

Growth: Good

Revenue

EBITDA

EPS

Free cash flow

UBER reported revenue of USD 38 589mn in the last 12 months, up 4% from FY23. At the same time, the dynamics of cash flow, as measured by free cash flow (FCF), were drastically different. EPS fell 24% from FY23 to USD 0.68. Market expects EPS to reach USD 0.90434 in FY24.Revenue has been growing rapidly in the past several years (strongly positive), while EBITDA has declined rapidly trend in recent years (strongly negative). This all contributed to very fast EPS growth (strongly positive). Free cash flow generation has been quite favourable and in contrast to the falling EBITDA. We emphasize the highly volatile dynamics of all key metrics. This is an extremely negative factor.

Dividends: Very low or none

The company does not pay dividends at all, or it pays them sporadically.

Default risk: Moderate

The risk of default is moderate. We note resilient historical revenue growth and low margin volatility, among the positive credit factors. Among the negative credit factors, we point to bleak profitability, poor working capital management, and inadequate interest coverage.

Volatility: Average

In normal market circumstances, UBER is moderately volatile. Put differently, without outstanding market volatility or shocking company news, the stock's price will move slightly wider than the index. The stock's losses on its worst days (less than 1-5% of the time) will range from large to notable.

Stress-test: Average

In highly turbulent market conditions, UBER is moderately volatile. In other words, the stock will fall more than the index in times of extreme market volatility or shocking company news. Standalone, the worst-day losses (less than 1% of the time) will likely be moderate.

Selling difficulty: Very low

UBER boasts very high trading liquidity. The average private investor can sell his common position in the stock immediately. Liquidity is usually stable and remains extremely favourable on the days with the lowest activity. The trading volume mostly stays the same even under highly turbulent market conditions.

Country risk: Very low

The institutional, legal, and compliance risks associated with the company's country are minimal. In combination with stringent business standards, shareholder rights are very highly protected.

Other risks: Negligible

No other major risks have been identified.