After the market tanked in 2022, last year brought renewed optimism from investors, and this resulted in strong recoveries for many of the stocks that suffered most during the bear market.

One such business is Uber Technologies (UBER -0.38%). The ride-hailing and delivery platform has seen its shares skyrocket 111% in the last 12 months. This return not only far outpaced the broader Nasdaq Composite index, but it also means Uber is now hitting fresh all-time highs.

But is now the right time to buy the soaring stock? There are valid arguments on both sides of the aisle when it comes to Uber's investment outlook.

Favorable traits

One obvious characteristic that makes for a high-quality business is the presence of an economic moat, something Uber does possess. Its moat stems from powerful network effects.

The mobility segment is a two-sided platform that connects riders and drivers in various cities across the world. And the delivery segment is a three-sided platform that connects consumers, drivers, and restaurants. The larger Uber gets, the more valuable its services become for all stakeholders.

For example, having more restaurants on the platform offers a superior experience for customers. At the same time, being able to serve a large pool of potential riders (or deliveries) increases the number opportunities for drivers to make money.

Uber's network effect protects its competitive position. It would be an extremely difficult task for a new entrant, no matter how well funded, to start a competing ride-hailing or delivery business from scratch. And the larger Uber gets, the truer this will become.

Another favorable trait about this business is its growth potential. Between Q3 2019 and Q3 2023, gross bookings and revenue increased 114% and 145%, respectively. The pandemic dealt a blow to Uber's trajectory, but the company was able to lean on its delivery service, as opposed to mobility. And it has come roaring back.

In the latest quarter, Uber saw its monthly active user base rise 15% year over year with completed trips up 25%. And in each of the last two quarters, the business reported positive operating income, breaking a long-running streak of losses. That's an encouraging sign for Uber's financial health.

Don't ignore the risks

Despite Uber's ability to generate healthy growth recently, the macroeconomic environment isn't something investors should ignore. The Treasury yield curve, which has been inverted since June 2022, has many market followers worried there is still a very real possibility the U.S. will enter a recession soon. And in this unfavorable scenario, gross bookings for Uber are likely to come under pressure as consumers cut back on going out or ordering delivery.

And while Uber's network effects are impressive, the company doesn't have switching costs. In other words, there is little reason for either consumers or drivers to be loyal exclusively to Uber. Nothing prevents them from using competing platforms like Lyft or DoorDash. This likely means Uber must continue offering incentives for the foreseeable future to attract and retain users, and that's not a cheap strategy.

Another risk is the stock's valuation. The recent rally has pushed the stock to a sky-high price-to-earnings (P/E) valuation of 133. That said, with Uber seemingly turning the corner on profitability, its forward P/E is a more reasonable (but still expensive) 57.

At these levels, there's no margin of safety for prospective investors -- I'd need to see a much more attractive valuation to consider buying shares. But for those who find the bull case too compelling, be prepared for continued volatility from this growth tech stock.