Uber (NYSE:UBER) shares are down roughly 25% since the February peak as a result of fears from the novel COVID-19 coronavirus outbreak that started in Wuhan, China. However, the long-term potential of the ridesharing company has not changed. Admittedly, the next few weeks to months are likely to be volatile.

On March 4, CEO Dara Khosrowshahi said, "Certainly our rides business to the extent that people stop leaving their house will take a hit, while our Eats business will probably actually benefit."

Before fears started to elevate, the stock was starting to build some momentum. Investors were pleased after both Uber and Lyft (NASDAQ:LYFT) signaled to the market that they were going to offer fewer incentives to riders, thereby increasing hopes of profitability.

A woman standing outside and looking out for a ride with a phone in her hand.

Image Source: Getty Images.

Delivering growth

Gross bookings experienced a 50% compounded annual growth rate (CAGR) between 2016 and 2019. Furthermore, there was an acceleration from 2018 to 2019. To be clear, Uber shares most of the gross booking with drivers, keeping between 5% and 25% (take rate) depending on the service and the country. Still, it is an essential metric because of the potential to eliminate the portion given to drivers.

The company generates 98% of revenue from two segments, Uber Rides and Uber Eats (food delivery). It has been steadily increasing the take rate for the Rides segment and has set the goal of reaching 25%, a boost from the current 22.5%. Incremental gains in the share it keeps make available more funds to reinvest in the company.

Uber and its biggest rival, Lyft, have shifted gears in the rides market. Whereas previously, the pursuit of growth at all costs prevailed, now the two are competing to see which can become profitable first. The change in focus will put upward pressure on profit margins.

The Eats business is experiencing remarkable growth around the world. It complements the Rides segment by using the existing infrastructure to provide an additional service.

Uber Eats already supplies 22% of gross bookings, and the future looks bright. In the fourth-quarter conference call, CEO Dara Khosrowshahi said, "We also saw promising results in the U.S., our largest Eats market. We grew our U.S. Eats business 44% to $1.7 billion in GBs [gross bookings] and maintained a strong Number 2 position."

Robotaxis in the near future?

The difference between gross bookings and adjusted net revenue was more than $50 billion for Uber in fiscal 2019. That amount is what goes to drivers, and it's what could potentially go to the bottom line if Uber can deploy a fleet of autonomous cars to replace human motorists.

Uber's significant investment in autonomy suggests it realizes the enormous potential. More than 1,500 people in the company are working on the strategic investment in autonomy. Importantly, products or services that result from the investment in the unit will have opportunities to generate revenue both internally and externally.

According to consulting company McKinsey, robotaxis will be on the roads within three years, though the evolution will come in phases. McKinsey forecasts that the first set of driverless cars will be able to drive you short distances in the best of road conditions. Then, in about five to eight years, autonomous vehicles will be able to take you farther via highways and to handle denser traffic in both daytime and nighttime conditions.

A view of an urban street from inside a car.

Image Source: Getty Images.

International exposure

Uber operates in 69 countries, which gives it the potential of reaching global economies of scale. As it is, the ridesharing company boasts 111 million monthly active platform consumers.

Uber segments its operations geographically into four regions. In the fourth quarter, each area experienced more than 25% growth year over year, with the U.S. and Canada, its largest market, leading the way at 41%. The global extent of the business increases revenue and provides diversification benefits, a one-two punch that should be a positive for valuation in the long run.

What this means for investors

Investing in Uber comes with several risks. The company posted an operating loss of nearly $5 billion in 2019, and even though it has more than $11 billion of cash on hand, it could burn through that money without ever becoming profitable. Additionally, regulatory approval for driverless cars might never happen or might occur sometime after Uber can reap the benefits.

Uber is a quintessential high-risk, high-reward tech stock. However, the long-run upside is significant enough to make the investment worthwhile.