Uber (NYSE: UBER) shares have risen 218% since 2023, beating the Nasdaq Composite index. This growth tech stock has a 4.4 price-to-sales ratio. This isn't as enticing as the shares' 1.5 multiple at the start of 2023. This company is likely benefiting from investor enthusiasm and a favorable market.
Is this business good? Investors should determine the quality of a firm before buying shares, especially if they want to own it for five years. Making an informed assessment involves numerous factors.
I think Uber fits here. This company leads its industry due to its first-mover advantage. To illustrate its global reach, Uber operates in over 10,000 cities. Uber controls 25% of the global ride-hailing and taxi business. Its 75% U.S. market share gives it a bigger lead.
Uber had 150 million monthly active users in Q4 2023, who took 2.6 billion trips and spent $38 billion. Uber's multi-sided platform can generate these monstrous figures, demonstrating its network impact. This moat shields the business from competitors, whether old or new.
A good company should also develop, in my opinion. Uber hasn't had this issue before. Uber's 2023 revenue was $37 billion, up 164% from 2019, despite the coronavirus epidemic. Uber plans to expand into advertising, Uber Health, and Uber for business, as well as more users, to accelerate growth. There's also room to boost Uber One memberships.
Wall Street expects Uber's revenue to grow 15.7% annually over the next three years. Analysts expect earnings per share will rise 48% annually due to the company's growing profitability. Operation is no longer losing money. Uber generated $3.3 billion in 2023 free cash flow. Due to its size, investors can expect this to happen often.
Uber has many advantages, but it's smart to know what could derail its success. I think one terminal risk component is unavoidable.
Uber is threatened by completely autonomous vehicle software, but it's unclear when or if this will happen. Regardless of who develops this technology first, Tesla, Alphabet's Waymo, or General Motors' Cruise might establish a driverless taxi service to compete with Uber. Riders would welcome this. Typical trips cost most due to the driver. Eliminating this stakeholder should lower ride prices.
To their credit, Uber execs aren't idle. They're preparing the company for future technological advances. Uber teamed with Waymo to offer autonomous rides on the ride-hailing app. Who knows where this technology will go in a decade. Despite this risk, acquire shares if you still think this is a worthwhile business.
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