In the midst of the tech industry’s AI revolution, one company’s remarkable journey often goes unnoticed. Uber Technologies (NYSE: UBER), the ride-hailing giant, has silently achieved an astounding 95% surge in its stock value year to date, overshadowed by the limelight that Big Tech attracts. But Wall Street insiders believe that the best is yet to come for Uber, and it might soon reach all-time highs, making it an enticing long-term investment.
Uber, once known solely for revolutionizing how people hail a taxi, has significantly expanded its horizons. The company now operates in three core segments: mobility, delivery, and freight. While mobility remains its primary revenue driver, the delivery segment allows customers to order from restaurants, grocery stores, and even alcohol shops, while the freight segment operates as Uber’s in-house logistics marketplace.
These strategic moves to diversify its offerings have had a profound impact on Uber’s financial performance. In Q1 2023, the company’s revenue surged by 29% YoY, reaching an impressive $8.8 billion. Notably, Uber’s net loss narrowed to $157 million, or $0.08 per share, a sign that the company is inching closer to profitability.
While the American market remains significant, Uber’s Europe, Middle East, and Africa (EMEA) segment showed an astonishing 86% growth in the same period, outperforming other regions. This growth is particularly noteworthy since Europe is currently undergoing an economic contraction. Despite this, Uber’s 130 million monthly active platform consumers (MAPCs) suggest immense potential, as the figure may be dampened due to the economic climate.
One of Uber’s astute strategies lies in its capital allocation. The company has made several high-profile acquisitions, including alcohol delivery service Drizly and food delivery platform Postmates. Additionally, Uber has invested billions in various ventures, such as electric scooter company Lime and Grab, a Southeast Asian competitor. These moves have contributed directly to Uber’s growth in the mobility and delivery segments, positioning it as a dominant player in the industry.
While a trillion-dollar valuation may seem ambitious, Wall Street is showing increasing faith in Uber’s potential. Leading financial institutions, including JPMorgan, Evercore, Roth MKM, and Tigress Financial, have issued “buy” or “buy equivalent” ratings for Uber stock, with price targets ranging from $59 to $75 per share. This indicates that Uber may be significantly undervalued and could experience a staggering 60% surge from current levels.
Examining Uber’s valuation ratios further supports this notion. With a price-to-sales (P/S) ratio of 2.8, Uber seems attractively priced, especially as it approaches profitability and successfully integrates acquisitions to drive growth.
Investors would be wise to consider that Uber topped The Motley Fool’s list of undervalued growth stocks in 2023. A prudent approach may involve dollar-cost averaging into the stock over the long term, keeping an eye on growth across all segments and geographies, as well as the expansion of margins and profitability.
As Uber silently steers towards potential trillion-dollar territory, long-term investors have the opportunity to hop on board and witness the unfolding of a tech success story with transformative implications for the gig economy and beyond.
