Uber: Too Soon For AV Bullishness

seekingalpha09-16

Uber's stock price jumped on progress in its autonomous vehicles' related partnerships. But it might be too soon to celebrate the news.The still small but fast-growing AV market has the potential to ...

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But it might be too soon to celebrate the news.The still small but fast-growing AV market has the potential to ...</p>\n\n<a href=\"https://seekingalpha.com/article/4721286-uber-too-soon-for-av-bullishness\">Source Link</a>\n\n</div>\n","source":"seekingalpha","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Uber: Too Soon For AV Bullishness</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nUber: Too Soon For AV Bullishness\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-09-16 16:18 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4721286-uber-too-soon-for-av-bullishness><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Uber's stock price jumped on progress in its autonomous vehicles' related partnerships. But it might be too soon to celebrate the news.The still small but fast-growing AV market has the potential to ...</p>\n\n<a href=\"https://seekingalpha.com/article/4721286-uber-too-soon-for-av-bullishness\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"IE00BYQQ9H92.USD","symbol_name":"BNY MELLON GLOBAL LEADERS \"A\" (USD) ACC","start_time":0,"source_url":"https://seekingalpha.com/article/4721286-uber-too-soon-for-av-bullishness","article_id":"2467981870","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/696041492/image_696041492.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2467981870","pubTimestamp":1726474732,"columns":[],"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"Uber's stock price jumped on progress in its autonomous vehicles' related partnerships. But it might be too soon to celebrate the news.The still small but fast-growing AV market has the potential to lift Uber's revenue growth, which is strong but not the same as before.At the same time, lower ride prices and the fact that Uber's growth has seen a recent drag from the delivery segment raise doubts whether AVs are the answer.This isn't to say Uber isn't performing. 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But it might be too soon to celebrate the news.The still small but fast-growing AV market has the potential to lift Uber's revenue growth, which is strong but not the same as before.At the same time, lower ride prices and the fact that Uber's growth has seen a recent drag from the delivery segment raise doubts whether AVs are the answer.This isn't to say Uber isn't performing. Its recent numbers are way ahead of its medium-term targets and double-digit EPS growth forecast.But is there a case for the stock? Read on to find out.   Spencer Platt/Getty Images News Arguably, the future of mobility has become increasingly interesting over the past few years with the fast-paced adoption of electric vehicles [EVs]. And the progress is far from ceasing, with autonomous vehicles [AVs] forecast to be a high-growth segment. It's little wonder then that ride hailing services provided Uber Technologies (NYSE:UBER) (NEOE:UBER:CA) saw a 6.5% jump yesterday, the third biggest year-to-date [YTD], after it reported progress on AV partnerships. Progressing on AV partnerships After tying up with Alphabet (GOOG) owned AV company Waymo for ride hailing services in Phoenix last year, Uber has now extended the partnership to Austin and Atlanta as well, with services expected to become available from early 2025. This is part of Uber's ongoing progress in AV partnerships as such. The graphic below shows its earlier partnerships, before it tied up with three more, which now presumably takes the number to 13. The recent tie-ups are as follows:  Just last month, it entered into a strategic partnership with London based Wayve, which includes an investment into the company. Uber's funding is expected to accelerate scalable development of AVs that can be used for ride hailing on the Uber app in the future. It also tied up with General Motors’ (GM) Cruise for ride hailing in August. As of now, Cruise has resumed supervised autonomous driving only, after its license was suspended in California last year following the accident of a passenger, which probably explains why the collaboration starts only next year. In July, it entered into a multi-year partnership with China’s BYD (OTCPK:BYDDY) in July, with the goal of bringing \"100,000 new BYD electric vehicles onto the Uber platform across key global markets\". To accelerate the transition to EVs, the partnership provides financial incentives to drivers, including a GBP 5,000 credit in the UK.    Source: Uber Technologies AVs' potential impact The size of the AV market is still rather small, estimated to be at ~USD 206 billion as of 2023. For context, this is just 28% of Tesla’s (TSLA) current market capitalisation and less than Toyota’s (TM) annual revenues, which were at USD 298 billion in its last financial year. Likely revenue growth acceleration... But it’s growing fast. With expectations of a compounded annual growth rate [CAGR] of over 41% up to 2030, its market size will increase to USD 2.3 trillion by the end of this decade. This is important to note considering that Uber's revenue growth, while still quite solid, has slowed down compared to the past five years’ CAGR of 27%. In the second quarter (Q2 2024), it reported 16% year-on-year (YoY) growth and its trailing twelve months [TTM] growth is even slower at 14.4%. ...or maybe not However, despite the promise, the advent of AVs doesn't necessarily ensure that Uber's revenue growth can pick up. According to ARK Investment Management research, by 2030, the cost of ride hailing with AVs will be dramatically lower than that of human ride hails (see chart below). So, unless demand increase more than makes up for the price drop, Uber's top-line might not be positively impacted as a result.   Source: ARK Investment Research Also, it's worth highlighting that cooling off in revenue growth is only partly due to mobility. A third of its revenues come from deliveries, which have been the big drag on growth in the latest quarter. At just 9% YoY, delivery revenues grew by a third of the 27% YoY increase in mobility revenues. Three-year targets look achievable For now, though, Uber's clearly well on its way to achieve its three-year targets. Its gross bookings grew by 21% YoY in Q2 2024, and have seen 20%+ growth in each of the past four quarters (see Slide 8 of the link). By comparison, as the graphic below shows, the company targets a more moderate mid-to-high-teens CAGR over the next three years. Similarly, the adjusted EBITDA has seen far more robust growth than targeted. It increased by 71% YoY in Q2 2024, and has seen between 80-150% growth in the four quarters before (See Slide 10 of the earlier link). This is far higher than the 30-40% CAGR targeted.   Source: Uber Technologies The market multiples If the adjusted EBITDA were to grow at the midpoint of the guidance range, by the end of 2026, the stock's EV/EBITDA would be down to 12.5x compared to the present forward EV/EBITDA of 22.8x and the TTM ratio at 52.3x. Also, the outlook for Uber's forward P/E improves nicely. With the average of analysts' estimates on Seeking Alpha forecasting double-digit growth in earnings per share [EPS] up to 2033, its forward multiple only improves. From the present level of 69x, declines to 19.7x for 2027 and to 6.8x by the end of the forecast period (see table below).   EPS and Forward P/E Estimates (Source: Seeking Alpha) Investor takeaways Short-to-medium term However, a look at Uber's peers like Lyft (LYFT) and DiDi (OTCPK:DIDIY) shows that for this year, their forward P/Es look much better at 15.4x and 31.2x. In fact, Lyft even has an even better revenue growth forecast at 27.6% compared with 16.3% for Uber. With UBER's 17.7% YTD price increase already, it's then hard to make a strong short-term case for it. The same goes for the medium term too, with the two stocks at 8x and 9.1x in 2027 compared to UBER's 19.7x. In fact, by then, other ride hailing stocks like the Singapore-based Grab Holdings (GRAB) are expected to become profit generating too, and with lower forward P/E of 15.8x. Long-term tip A bigger picture look at the stock to make a long-term assessment goes more in its favour. Uber is the leading ride hailing app and the most widely available food delivery app across the world too. It has seen robust revenue growth in the past, has become profitable and is well on its way to achieve its medium term targets too. That's saying a lot. The company is hardly stopping here, either, with its active engagement in next-generation mobility solutions from EVs to AVs. While its partnerships with various manufacturers are still in their nascent stages, the segment's high-growth sounds promising. Whether this translates into positive financials for Uber, however, remains to be seen as the lower price per ride has to translate into bigger demand. How well it impacts the company's numbers will be known only over time. In the meantime, going by its medium-term targets, growth, at least, isn't expected to be what it was. It makes up for this with robust earnings forecasts, but here too, its valuations look elevated right now.  The key takeaway here is that Uber is doing well and has much potential. But both its high price right now and the wait period before the potential is realised, make it a Hold for now.","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"corporation,analysis","news_rank":0,"symbols":[],"gpt_button":0},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.3","shortVersion":"4.29.3","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2467981870"}