Shares of the leading ridesharing company, Uber Technologies, Inc. (UBER), have surged over 80% in the past year and gained 29.8% year-to-date, closing the last trading session at $79.90. This strong performance is fueled by its ability to turn profitable last year, driven by strong revenue growth.

Now, the company is expanding beyond its core ridesharing services into delivery, forming strategic partnerships to push this growth even further. But will its ongoing efforts to diversify help propel its stock even higher?

Uber’s Autonomous Ride-hailing Business Is Growing

A big part of Uber’s growth strategy centers around its push into autonomous ride-hailing and delivery. The company recently announced a multiyear partnership with Avride to bring autonomous vehicles and delivery robots into its ecosystem. Initially, Uber Eats customers in Austin will see these sidewalk robots in action, with plans to expand this technology to Dallas and Jersey City by the end of the year.

On September 25, UBER teamed up with WeRide, a global leader in autonomous driving, to bring self-driving vehicles to the United Arab Emirates. This move aligns with Uber’s belief that the future of transportation will be shared, electric, and autonomous. By collaborating with top AV companies, the company is not only bringing this technology to more cities but also expanding its global footprint.

In the same month, Uber expanded its partnership with Waymo to offer autonomous rides in Phoenix, and starting in the first quarter of 2025, people in Austin and Atlanta can also request Waymo rides through the Uber app. If these ventures succeed, Uber may be well-positioned to roll out autonomous rides nationwide, pending regulatory approval.

Impressive Financial Performance

UBER’s growth engine continues to hum, delivering its sixth consecutive quarter of trip growth above 20%, alongside record profitability. The company’s revenue for the second quarter ended June 30, 2024, increased 15.9% year-over-year to $10.70 billion, while its gross bookings grew 19% from the year-ago value to $39.95 billion.

Its income from operations came in at $796 million, indicating an improvement of 144.2% from the prior year quarter. The company’s adjusted EBITDA stood at $1.57 billion, up 71.4% year-over-year. Moreover, its attributable net income amounted to $1.02 billion or $0.47 per share, representing an increase of 157.6% and 161.1% year-over-year, respectively. Also, its free cash flow rose 51% over the prior-year quarter to $1.72 billion.

Commenting on its last quarter’s performance, CEO Dara Khosrowshahi said, “The Uber consumer has never been stronger--more people are using the platform, and more frequently, than ever before--while drivers and couriers earned a new all-time high of $17.9 billion over the quarter.”

Favorable Analyst Estimates

Street expects UBER’s revenue for the fiscal third quarter (ended September 2024) to increase 18.1% year-over-year to $10.97 billion. Similarly, its EPS for the same period is expected to register a robust growth of 285.9% from the prior year, settling at $0.39. Moreover, the company has topped the revenue estimates in three of the trailing four quarters, which is promising.

Further, its EPS and revenue for fiscal year 2024 (ending December 31) are anticipated to increase by 20.8% and 16.3% year-over-year, reaching $1.05 and $43.35 billion, respectively.

Stretched Valuation

In terms of forward non-GAAP P/E, UBER’s 36.43x is 75.5% higher than the 20.76x industry average. Its 3.95x forward EV/Sales is 100% higher than the 1.97x industry average. Likewise, its 3.87x forward Price/Sales is 151.5% higher than the 1.54x industry average.

Mixed Profitability

UBER’s 9.76% trailing-12-month levered FCF margin is 49% higher than the 6.55% industry average. Furthermore, the stock’s 32.37% trailing-12-month gross profit margin is 2.2% above the 31.68% industry average. Also, its trailing-12-month Return on Common Equity of 19.14% is 48.7% higher than the 12.87% industry average.

Conversely, UBER’s trailing-12-month net income and EBITDA margins of 5.02% and 6.98% are 18.8% and 50.2% lower than industry averages of 6.18% and 14.01%, respectively.

POWR Ratings Reflect Uncertainty

UBER has an overall rating of C, equating to a Neutral in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. UBER has a C grade for Stability, which is in sync with its 1.33 beta.

However, it has a D grade for Value, consistent with its stretched valuation. Nonetheless, the company’s impressive financial performance in the last reported quarter has helped the stock earn an A grade for Growth.

UBER is ranked #31 out of 76 stocks in the Technology – Services industry. Click here to access UBER’s Momentum, Sentiment, and Quality.

Bottom Line

Uber’s ambitious AV expansion strategy bodes well with industry predictions for the exponential growth of this market segment. The global autonomous ride-hailing market is projected to reach $212.80 billion by 2029 (expanding at a CAGR of 4.9%), which indicates that widespread commercial adoption of autonomous ride-hailing is just around the corner. Plus, the company is also expanding into higher-margin areas like advertising, which could significantly boost its profitability.

However, given the stock’s current high valuation, it could be wise for investors to watch how these initiatives unfold and wait for a better entry point into the stock.

How Does Uber Technologies, Inc. (UBER) Stack Up Against Its Peers?

UBER has an overall POWR Rating of C, equating to a Neutral rating. You may check out these A-rated stocks within the Technology – Services industry: Leidos Holdings, Inc. (LDOS), RADCOM Ltd. (RDCM), and Teradata Corporation (TDC). For exploring more Buy-rated Technology – Services stocks, click here.

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UBER shares were trading at $79.12 per share on Friday afternoon, down $0.78 (-0.98%). Year-to-date, UBER has gained 28.50%, versus a 24.16% rise in the benchmark S&P 500 index during the same period.

Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.

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