As it currently stands, there are only seven companies in the world with a market capitalization in excess of $1 trillion. Six of them are technology businesses, with the outlier being energy conglomerate Saudi Arabian Oil, also called Saudi Aramco.
Technology businesses have long been considered high-risk, high-reward opportunities. Many of these companies develop software platforms, which often come with predictable, recurring revenue at a high margin. By consistently generating strong cash flow, these businesses have been able to reinvest profits into other growth areas including streaming, cloud computing, e-commerce, gaming, consumer electronics, and more.
One company that has done a stellar job evolving beyond its initial service is Uber Technologies (UBER -0.38%). You probably know Uber as an alternative to taxis. But the company actually provides far more value to customers.
Let's dig into Uber's entire business and get a better understanding of which industries the company is disrupting. Upon learning about Uber's prolific ecosystem, the investment case should become much more clear. Moreover, as the company enters its next phase of growth, now may be the time to scoop up shares before Uber possibly joins the ranks of trillion-dollar tech companies.
More than a taxi alternative
Uber's core business is a ride-hailing app akin to Lyft. The company offers different tiers of rides, including less expensive shared rides as well as premium personal driver services.
In 2023, Uber's mobility business generated $69 billion in gross bookings -- an increase of 31% year over year. This translated into $19.8 billion in revenue, representing 41% top-line growth in the mobility segment in 2023. Perhaps even more encouraging, Uber's mobility business improved its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) by 50% to $5 billion last year.
What investors may not fully realize is that Uber has complemented its core mobility business with a budding delivery operation. A series of acquisitions, anchored by food and alcohol delivery services Postmates and Drizly, has helped Uber create a full-spectrum platform offering convenience as a service. In 2023, Uber's delivery services grew bookings by 14% year over year to $63.7 billion.
The hidden gem of its business
By rounding out its ridesharing capabilities with delivery services, Uber is giving consumers an unmatched level of convenience when it comes to transportation, food delivery, and more. It's not surprising to learn that 34% of the company's monthly consumers are using more than one product on the Uber platform. While this level of cross-selling is encouraging to see, there is actually something even more lucrative that Uber is selling.
The company has a subscription service called Uber One that provides users benefits like discounts on rides, food orders, and other promotions. In a way, it's similar to Amazon Prime. While Prime may not be considered cheap, many users justify the cost with the amount of money they save on shipping and faster delivery.
In November 2021, Uber introduced Uber One, which is now available in 25 countries. As of Dec. 31, 2023, Uber One boasted 19 million members. Given that Uber is active in over 70 countries, the revenue generating potential for its subscription service could just be getting started.
As Uber One subscriptions continue to grow, coupled with cross-selling efforts that are still very much scaling, the long-term prospects for Uber look encouraging. Not only will these lead to further revenue growth, but more importantly, these high-margin businesses should contribute significantly to the company's profitability.
The path to a trillion-dollar valuation
UBER Revenue Estimates for Current Fiscal Year data by YCharts.
The chart above illustrates the consensus revenue estimates for Uber through 2025. Should Uber achieve these targets, the company would be growing at around 16% annually.
If Uber maintained top-line growth of 16% through 2030, the company would be worth roughly $459 billion assuming its long-term price-to-sales (P/S) multiple of 4.4.
It's important to keep in mind that the analysis above is merely just a fun exercise with numbers. In order for Uber to achieve a $1 trillion valuation by 2030, the company will likely need to grow at much higher rates. Nevertheless, the long-term picture for Uber looks exciting.
The company appears well positioned to enter a new growth phase, and the popularity of its subscription service and its complementary delivery options further differentiates Uber from other applications. Meanwhile, as autonomous driving becomes more of a priority for the mobility industry at large, Uber could end up a big winner if this technology becomes commercialized.
While a trillion-dollar valuation may be tough to achieve by 2030, I see the company reaching this milestone at some point. Now still could be a unique opportunity to scoop up some shares in Uber before its next evolution comes into fully swing.
