What Happened:
Shares of ride sharing and on demand delivery service Uber (NYSE: UBER) jumped 6.5% in the morning session after the company announced a partnership with Waymo to provide autonomous ride-hailing services to riders in Austin and Atlanta.
According to the press release, Waymo's fully autonomous, all-electric Jaguar I-PACE vehicles will be available to riders through various Uber services, including UberX, Uber Green, Uber Comfort, and Uber Comfort Electric. The move could improve the number of fully autonomous trips booked via the Uber app and accelerate topline growth as more users explore the option.
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What is the market telling us:
Uber’s shares are quite volatile and over the last year have had 11 moves greater than 5%. In context of that, today’s move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 7 months ago, when the company gained 12.1% on the news that peer, Lyft reported fourth-quarter results indicating growing users, enabling it to beat Wall Street's revenue and EPS estimates.
Lyft reported that Rides growth accelerated for the fourth quarter in a row to 26% year on year in the quarter. In addition, Lyft's guidance for Q1 2024 came in ahead of expectations for gross bookings (from which the company generates revenue by taking a cut) and adjusted EBITDA, showing that both near-term growth and profits are better than expected.
Lyft expects to generate positive free cash flow for the full year 2024, converting roughly half of its forecasted full-year EBITDA into cash. This is a nice milestone.
Overall, the results demonstrate a strong demand for ride-sharing services amid worries about a slowing economy.
In addition, Uber announced its first ever share repurchase program of up to $7 billion of its common stock authorized by its Board of Directors. CFO Prashanth Mahendra-Rajah added "Today's authorization of our first-ever share repurchase program is a vote of confidence in the company's strong financial momentum. We will be thoughtful as it relates to the pace of our buyback, beginning with actions that partially offset stock-based compensation, and working towards a consistent reduction in share count."
Lastly, the company provided an updated financial outlook for the coming years. It expects gross bookings growth in the mid to high teens over the next three years. In addition, adjusted EBITDA is expected to accelerate at more than two times gross bookings growth (in the high 30s to 40% (CAGR)). Free cash flow was projected at over 90% of adjusted EBITDA annually over the three-year period. The forecasts demonstrate the company's resolve toward balancing growth and profitability, which was cheered by the market as it represents an improvement over the early days of weak profitability and cash burn.
Uber is up 22.4% since the beginning of the year, but at $71.48 per share it is still trading 12.2% below its 52-week high of $81.39 from February 2024. Investors who bought $1,000 worth of Uber’s shares 5 years ago would now be looking at an investment worth $2,150.
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