Uber Technologies' (UBER 1.67%) stock price surged 12% on May 2 after the transportation and food delivery giant posted its first-quarter report. Revenue rose 29% to $8.8 billion and exceeded analysts' expectations by $90 million.
Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) surged 353% to $761 million, marking Uber's seventh-consecutive quarter of profitability on an adjusted EBITDA basis. On a generally accepted accounting principles (GAAP) basis, the company also narrowed its net loss from $5.9 billion to $157 million, or $0.08 per share, which cleared the consensus forecast by $0.01.
Those headline numbers support the bullish thesis for Uber, but should investors chase its post-earnings rally? Let's decide by reviewing the finer details of the company's first-quarter earnings report, its near-term challenges, and its valuation.
Image source: Uber.
Accelerating growth in customers and trips
In the first quarter, Uber's monthly active platform consumers (MAPCs) grew 13% year over year to 130 million. The number of trips rose 24% to 2.1 billion and gross bookings -- which more accurately reflect the company's underlying growth than its revenue -- climbed 19% (and 22% in constant-currency terms) to $31.4 billion. Growth in MAPCs and trips accelerated from the previous quarter, while growth in gross bookings held steady on a reported basis.
|
Metric |
Q1 2022 |
Q2 2022 |
Q3 2022 |
Q4 2022 |
Q1 2023 |
|---|---|---|---|---|---|
|
MAPCs Growth (YOY) |
17% |
21% |
14% |
11% |
13% |
|
Trips Growth (YOY) |
18% |
24% |
19% |
19% |
24% |
|
Gross Bookings Growth (YOY) |
35% |
33% |
26% |
19% |
19% |
Data source: Uber. YOY = year over year.
Uber expects gross bookings to rise 13%-17% year over year (and 18%-22% in constant-currency terms) in the second quarter. That outlook implies growth will cool off slightly and the company will face tougher currency headwinds. However, its take rate -- or the percentage of each booking it retains as revenue -- continues to rise sequentially and year over year across both its mobility and delivery divisions.
|
Take Rate |
Q1 2022 |
Q2 2022 |
Q3 2022 |
Q4 2022 |
Q1 2023 |
|---|---|---|---|---|---|
|
Mobility |
23.5% |
26.6% |
27.9% |
27.8% |
28.9% |
|
Delivery |
18.1% |
19.4% |
20.2% |
20.5% |
20.6% |
Data source: Uber.
Uber's take rates rose as it rolled back its incentives for drivers and riders, which it had ramped up throughout the pandemic and the subsequent inflation-induced spike in gas prices. Those reductions didn't impact its growth in rides, drivers, or driver earnings -- which all improved, alongside its customer engagement rates, and boosted its profitability per ride or delivery. Analysts expect Uber's total revenue to rise 16% to $36.9 billion for the full year.
Rising margins and cash flows
Uber's stable top-line growth, economies of scale, and rising take rates enabled it to rein in its marketing expenses and focus on improving profitability. It also streamlined its business over the past few years by divesting its non-core divisions.
That's why the company's adjusted EBITDA margin expanded from negative 4.4% in 2021 to positive 5.4% in 2022, and why it rose another 610 basis points year over year to 8.6% in the first quarter of 2023. By comparison, Uber's smaller rival Lyft saw its adjusted EBITDA loss widen from $158 million in 2021 to $417 million in 2022, which gave it a negative adjusted EBITDA margin of 10.1%.
Uber expects to generate an adjusted EBITDA of $800 million-$850 million in the second quarter. That would represent 120%-134% growth from the prior-year quarter and give it an adjusted EBITDA margin of about 8.8%-9.4% (based on analysts' estimates for $9.1 billion in reported revenue). Analysts also expect its adjusted EBITDA margin to rise to 8.7% for the full year as it narrows its GAAP net loss from $9.1 billion to just $301 million.
NYSE: UBER
Key Data Points
As Uber's margins expanded, its free cash flow (FCF) improved from negative $743 million in 2021 to positive $390 million in 2022, then hit a record quarterly high of $549 million in the first quarter of 2023. Uber was also sitting on $4.2 billion in cash, cash equivalents, and short-term investments at the end of the quarter -- and CFO Nelson Chai said it would evaluate "returning excess capital to shareholders" over the "next few quarters."
Uber is a screaming buy at these prices
With an enterprise value of $69 billion, Uber still looks surprisingly cheap at less than 2 times this year's sales and 22 times its adjusted EBITDA. Lyft might seem like an even cheaper ride-hailing play at less than 1 time this year's sales and 12 times its adjusted EBITDA, but it faces much tougher near-term headwinds than Uber.
Even after its post-earnings pop, Uber remains nearly 20% below its initial public offering (IPO) price of $45. I believe it could return to its IPO price and head even higher once a new bull market starts, so it could be a great contrarian buy right now.
