Is Uber Technologies Stock a Buy Now?

Uber Technologies' (UBER -2.95%) stock price jumped 12% on Tuesday, Nov. 1, after the ride-hailing and delivery company posted its third-quarter results. Its revenue rose 72% year over year to $8.34 billion, which beat analysts' estimates by $220 million. It halved its net loss from $2.42 billion to $1.21 billion, or $0.61 per share, but still missed the consensus forecast by $0.43.

Its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) -- excluding its stock-based compensation, divestments, and investment-related gains and losses -- improved from just $8 million a year ago to $516 million. That also represented Uber's fifth consecutive quarter of profitability on an adjusted EBITDA basis.

Image source: Uber.

Uber's growth rates were impressive, but its stock still trades more than 30% below its initial public offering (IPO) price of $45. So is it finally the right time to turn bullish on Uber?

How rapidly is Uber growing?

Uber's monthly active-platform consumers (MAPCs) grew 14% year over year to 124 million in Q3. Its total trips increased 19% to 1.95 billion, while its gross bookings -- or the total value of all services booked on its platform -- rose 26% (32% in constant currency terms) to $29.12 billion. Its take rate, or the percentage of bookings Uber retains as revenue, also improved both sequentially and year over year across its mobility and delivery platforms.

Uber's revenue growth throughout 2022 was notably inflated by Uber Freight's acquisition of Transplace last November and a court-mandated change to its U.K. Mobility business last December, which transformed it into an official transportation-services provider and forced it to report all of its bookings as revenue. Therefore, Uber's bookings and take rates give investors a clearer picture of its underlying growth than its total revenue:

Data source: Uber. Year-over-year growth.

Uber's growth in gross bookings decelerated over the past year, and it expects that slowdown to persist with 23% to 27% year-over-year growth (in constant currency) terms in Q4. It expects currency headwinds to reduce its bookings by about seven percentage points, which implies its reported bookings will only grow 16% to 20%.

Uber's gradual slowdown isn't that surprising, since it's lapping its robust post-pandemic recovery throughout 2021. Uber's take rates are still improving, but the mobility segment's big year-over-year jump was inflated by the aforementioned changes to its U.K. business model. Excluding that big change, its mobility take rate would actually have declined to 20.2% in Q3 -- which reflects the ongoing impact of rising fuel prices.

Will Uber's profitability continue to improve?

Uber's bookings growth is cooling off, but it's gradually narrowing its GAAP losses -- which still include some big investment-related losses related to its stakes in companies like Grab, Didi, Zomato, and Aurora. Uber gained most of those equity stakes through share-swap deals as it sold off its weaker non-core businesses. Excluding those messy investments and its stock-based compensation, Uber's adjusted EBITDA margins soared over the past year.

Data source: Uber.

Uber expects to generate $600 million to $630 million in adjusted EBITDA in Q4, which implies its full-year adjusted EBITDA could easily top $1.6 billion. It also reiterated its goal of generating $5 billion in adjusted EBITDA in 2024 even as it grants its U.K. drivers a minimum wage, paid holidays, and automatic pension plans under its new business model.

Uber also doesn't seem too worried about the Biden administration's plan to force ride-hailing platforms to reclassify their drivers from independent contractors to full-time employees. During the conference call, CEO Dara Khosrowshahi said Uber was still holding a "robust dialogue" on a state level with regulators about "preserving flexibility, having robust earners, and then also providing some protections appropriate for independent contractors."

Is it the right time to buy Uber?

Analysts expect Uber's revenue to rise 82% to $31.8 billion this year, then grow 17% to $37.4 billion in 2023 after its year-over-year comparisons normalize. They expect its adjusted EBITDA to reach $1.61 billion this year, then nearly double to $3.22 billion in 2023. Based on those expectations and Uber's enterprise value (EV) of $63.5 billion, its stock looks reasonably valued at about 20 times next year's adjusted EBITDA. But its rival Lyft -- which only operates in the U.S. and Canada -- has a much lower forward EV/EBITDA ratio of 8.

I personally believe Uber is worth nibbling on as its profitability improves, but the unpredictable regulatory headwinds and its lack of GAAP profits still make it a risky stock to hold in this challenging market for speculative growth plays.