About Uber Technologies
However, as many of you likely already know, Uber and DoorDash still have their fair share of notable differences in terms of their target consumers and respective business models overall.
For example, while DoorDash (at least, at the time of this writing) focuses practically only on food (although it actually does have some partnerships with certain specialty retailers and grocery chains such as Sprouts Farmers Market, Big Lots, DICK’s Sporting Goods and a few others), food from restaurants is the name of the game for Uber’s archnemesis in this particular category.
On the other hand, Uber is home to what it is most likely known best for, its ride-hailing platform.
Who would’ve thought that getting into a stranger’s personal vehicle and paying them to take you to where you need to go would become mainstream?
I guess the founders of Uber did.
In addition to its prominent ride-hailing platform, the company also generates a more than considerable sum of its total annual revenues through its food delivery platform, Uber Eats.
Remember how in previous stock analysis articles we mentioned that, on the side, we deliver food through DoorDash to save for school?
We also deliver through Uber Eats’ platform.
Yep, we’re what is called “multi-appers.”
In essence, all this means is that instead of just using, looking for or receiving orders through DoorDash or just one delivery platform alone, we also simultaneously field orders from Uber Eats as well in order to get the best possible orders and, if possible, stack on some orders between the apps in order to maximize our time as drivers.
Whether you are actually interested in knowing or not, from the prized perspective (even we sort of laughed at that one) of an independent contractor, Uber is much better in that they essentially pioneered the ability for drivers to find exactly where to drop off a customer’s food, all the way down to the location of their exact unit number (if at a hotel, apartment or other complex) instead of just dropping a pin to the front of the building, leaving the independent contractor little time and a lot of stress.
Additionally, Uber Eats’ driver app has (from our experiences) been much less prone to glitching, freezing and crashing in comparison to DoorDash’s Dasher app, not to mention that it is considerably easier to contact the customer in question in the event of traffic, not being able to find their location, among many other things.
Our experience as gig workers with Uber Eats’ app has been overwhelmingly positive.
If you didn’t care and are just more interested in this company and its other businesses, Uber also has a freight segment under its corporate umbrella, complementing its primary focus in both rideshare and food delivery.
Like DoorDash, Uber generates a bulk of its total annual revenues through delivery fees and other service fees associated with its offerings.
There’s a lot of discussion and debate to be had regarding whether or not Uber maintains a recession resistant or recession vulnerable business model and while we could yap on about both sides of this coin, we’d rather allow the numbers to speak for themselves and devise our own opinion(s) regarding Uber Technologies as a company and in our case, a consideration as a long-term investment.
And so it begins.
Uber’s stock financials
With a prevailing market capitalization of $80.41 billion, a share price just south of $40, no regular annually distributed dividend to its shareholder base along with not a listed price-to-earnings (P/E) ratio in sight, there’s some information to briefly unpack at this juncture.
Namely, to us at least, it is fully expected that this company would have no dividend and no presently listed price-to-earnings ratio for just about the same reason.
Although Uber is a dominant force in the rideshare, logistics and food delivery spaces, food delivery and rideshare in particular aren’t known for producing the highest of margins (compared to other sectors, at least), thus it doesn’t seem as though Uber is fully profitable yet (at the time of this writing), however, given the boost from its somewhat new freight business and sheer sector dominance of the ride-hailing space, it will likely become profitable sooner rather than later, hopefully following the current recession.
This also plays a role in justifying why Uber doesn’t pay a regular dividend to all of its shareholders, since, being an established but still growing technology company, it needs to retain, invest and reinvest as much of its capital as it can, so as to stay ahead of its competitors and continue providing a better experience for its independent contractors as well as its customers across the board.
The last thing this company needs is a consistent, quarterly cash drain.
Onto the state of the company’s balance sheet, Uber’s executive team is tasked with handling and deploying approximately $32.1 billion in terms of total assets as well as around $24.8 billion in terms of total liabilities.
Given the sheer amount of (necessary) investment(s) necessary to maintain its leadership position in the industries in which it operates, we think this is a good balance sheet, nothing more, nothing less, as we have no major qualms with the overall structure and total asset-total liability structure, especially since this company is likely dedicating a lot of its current liabilities to funding current and prospective growth initiatives that will more than likely help the company moving forward.
Even though this is the case, Uber’s executive team has not seemingly become overleveraged (given that its total assets are greater than the amount of its total liabilities at the time of this writing) in the process, which is also assuring.
From the perspective of the company’s income statement, Uber’s total annual revenues have seen tremendous growth, mind you during extraordinary (in its most literal sense) economic times.
Specifically, the company’s total annual revenue stood at around $10.4 billion in 2018, rose to $13 billion in the year that followed, drifted down slightly to $11.1 billion, nearly $17.5 billion in 2021, leading all the way up to its latest reported figure (on TD Ameritrade’s platform) of a whopping $31.8 billion (2022).
While it is factually correct that some years were just better than others, for Uber to have grown its total annual revenues at this significant of a rate as consumers across the globe are tightening their spending, the numbers hint at the fact that Uber is becoming less seen as a consumer discretionary expense and more and more of a part of people’s everyday lives, whether it’s ordering food or catching a ride or, of course, moving some freight.
If these numbers continue to trend upward, especially as the current economic recession deepens, investors across the board will have a huge (and quantifiable) reason to love Uber.
Onto the company’s cash flow statement, Uber’s net income since 2018 has been negative (more negative in some years than others), excluding its positive year of $987 million in 2018, with its net income stretching all the way to almost -$10 billion in 2022 and floating around -$6.8 billion (2020) and -$8.5 billion (2019).
While this sort of breakdown makes sense given its intense amount of investment and reinvestment in its technologies, we do hope there is some light at the end of this tunnel as this company matures.
Primarily, we hope Uber is able to hew down its billion-dollar net income losses in the years to come (as we understand this will naturally take some time, especially for a company like Uber) and draw closer to generating positive net income figures in the not too distant future.
It can also be noted that Uber, being the well known, well funded company that it is, will likely not have to worry too much about going under (i.e., filing for bankruptcy), which is a good thing to note but at the same time, not at all an excuse to prolong the current cash flow bleed.
Uber’s stock fundamentals
According to TD Ameritrade’s platform, Uber has a trailing twelve month (TTM) net profit margin of -10.35% to the industry’s average of 8.27%.
Usually we’d feel the need to introduce this figure through some semi-humorous introductory statement, but unfortunately, not today.
Facts can just be facts in their own right sometimes.
Nevertheless, looking at these facts, we’re not terribly disturbed by Uber and its, at face, lackluster TTM net profit margin as it relates to the average of the industry since this company is still in growth mode and is setting a more than solid foundation in out-profiting the industry (on a TTM basis) for the years and decades to come through some aforementioned cash burn.
Time will tell, of course.
Lastly, with regard to the company’s TTM returns on both assets and investment(s), Uber’s (yes, on both accounts) trail the industry’s averages by margins similar to the tune of its aforementioned TTM net profit margin discrepancy.
To which we reply, as long Uber is growing and nipping away at the market share of its competitors and staying on top of its products and the development thereof, let’s allow time to do its work.
Should you buy Uber stock?
As previously alluded to in paragraphs above, Uber has become such a household name with commonly used, easy-to-use products and services that are each and every day becoming more and more integrated in people’s lives.
We don’t see this changing anytime soon, even given the current recessionary state of the economy.
Especially as it continues to expand its freight business (which again, will more than likely offer higher profit margins than its other business segments) and its offerings on its rideshare and food delivery platforms, more and more will continue habitually flocking to and using this company.
While we think it might take some time for this company to become net profitable (on a TTM basis), there are a lot of long-term tailwinds and habitual ubiquity just happens to be one of them.
Also, when a company’s name becomes a verb (i.e., to Uber somewhere), you know you’re onto something in terms of brand recognition.
Additionally, its revenues have grown tremendously over the last handful of tumultuous years, which is undoubtedly a good sign.
For those who are willing to give this company some time within the current decade, we think Uber’s stock (NYSE: UBER) is well worth one’s consideration as an investment for now and the future.
Therefore, we give the company’s stock a “buy” rating.
DISCLAIMER: This analysis of the aforementioned stock security is in no way to be construed, understood, or seen as formal, professional, or any other form of investment advice. We are simply expressing our opinions regarding a publicly traded entity.