After a difficult 2022 that saw Uber (UBER 0.42%) stock fall 41%, investors are cheering the company's monster gains this year. The stock is up 85% in 2023 (as of Oct. 6), crushing the rise of the Nasdaq Composite Index, as optimism starts to grow for the ride-hailing and delivery platform. 

But shares of Uber are still down 28% from their all-time high. Investors might want to take advantage of the discount to buy the stock. Here's why. 

Uber's economic moat 

What makes Uber a worthy investment candidate is the presence of an economic moat. In the mobility segment, the two-sided platform that consists of riders and drivers has created a network effect. 

Drivers benefit as more riders join, simply because there are more potential customers. And this could reduce idle times when drivers aren't generating revenue, thus increasing utilization. In addition, riders get a much better experience when there are more drivers. Wait times are reduced, and pricing could be more attractive, as there is more supply. 

A similar situation is present in the delivery business. The only addition is the stores and restaurants that are involved. 

Consequently, as Uber gets bigger, with a larger number of stakeholders on the platform, its competitive positioning gets stronger thanks to more powerful network effects. The data backs this up. In the latest quarter (Q2 2023 ended June 30), monthly active platform consumers and trips completed totaled 137 million and 2.3 billion, respectively. Both of these key performance indicators were up significantly from the same quarter in 2019. 

Another moat source that Uber possesses is a data advantage. It collects so much valuation information on its riders and drivers that it can utilize to constantly improve the service and experience. And this could lead to even greater usage. 

Moreover, the company is starting to expand its digital advertising capabilities. Uber says it had more than 400,000 merchants actively advertising on the platform last quarter, with annualized revenue totaling $650 million. I'd suspect that this is an extremely high margin, which can help company profitability going forward. Having access to a large data pool will only help Uber bolster its ad business.  

These qualitative factors, namely the network effect and data advantage, help Uber fend off competition, mainly from the likes of Lyft and DoorDash. And they increase the likelihood that Uber will be a leader far into the future. 

Improving financials 

When Uber reported its Q2 results, what caught the attention of investors was major financial progress. The business posted generally accepted accounting principles (GAAP) operating income of $326 million (the first time this was positive) and free cash flow (FCF) of $1.1 billion (the first time this was over $1 billion) during the three-month period. It's very encouraging to see Uber turn the corner finally and hopefully start being a financially sound enterprise. 

In the four-year period from 2019 through 2022, Uber generated a total operating loss of $19.1 billion. The business got the benefit of the doubt because it was investing heavily toward growth objectives. And easy-money policies and low interest rates helped justify foregoing profits now. 

But in a higher-rate environment, it's great that Uber has shown it can stop reporting losses, as this is what investors will start caring more about. It's also impressive that Uber was able to boost its metrics in Q2 while also decreasing its operating expenses on a year-over-year basis. That's a clear sign of a scalable business model. 

Better days are also on the horizon. Wall Street consensus analyst estimates forecast revenue increasing at a compound annual rate of 17% between 2022 and 2025. That's still a healthy clip, even though it would mark a slowdown from prior years. 

However, it's not all bad news. Analysts see FCF totaling $6.8 billion in 2025, more than double the $3.2 billion projected for the current year. 

With a strengthening economic moat, coupled with financials that are trending in the right direction, there's a lot to like about Uber.