Bill Ackman is the founder and CEO of Pershing Square, a hedge fund with around $12.9 billion in assets under management. That includes billions of dollars invested in popular stocks like Alphabet, Nike, and Chipotle Mexican Grill.
On Friday, Feb. 7, Ackman took to social media platform X (formerly Twitter) to reveal that Pershing Square has accumulated 30.3 million shares in Uber Technologies (UBER 1.85%), which operates the world's largest ride-hailing platform. Based on Uber's stock price of $74.60 at the close on Friday, it's now Pershing's largest position with a value of $2.2 billion.
Ackman believes Uber is trading at a discount to its intrinsic value, but I think the stock could deliver significant upside over the long term for another reason -- autonomous vehicles, which have the potential to transform the company's economics.
Image source: Getty Images.
Uber values the autonomous opportunity at $1 trillion
Uber serves over 171 million people every month across its ride-hailing, food delivery, and commercial freight services. The company accepted a record $162.7 billion in gross bookings during 2024 across all three segments -- a figure that represents the full amount customers paid for every ride, food order, and commercial delivery.
Uber's drivers earned a record $72.5 billion in 2024, which was the single largest piece of the $162.7 billion in gross bookings. After deducting driver costs and the money paid to restaurants for food orders, Uber was left with just $43.9 billion in revenue.
Therefore, if Uber could eliminate the enormous cost of its drivers, its revenue would organically soar because it would keep more of its gross bookings. That's why the company is actively pursuing autonomous driving solutions, not only for its ride-hailing service but also for its food delivery and freight businesses.
Of course, some of the driver costs would be replaced by fees payable to the autonomous vehicle companies operating within its network, so Uber can't eliminate that expense entirely. However, self-driving cars can operate 24 hours per day, seven days per week, with few ongoing expenses, so they will still be significantly better from a financial perspective.
Uber could also buy a fleet of autonomous vehicles and operate them itself, which means it could pocket the entire gross booking from every ride-hailing trip. Tesla is expected to sell its Cybercab robotaxi for around $30,000, which might be an attractive option. However, it would involve a big change to Uber's business model, because it has always relied on drivers to supply their own cars (and as things currently stand, it will rely on its partners to supply autonomous vehicles).
Nevertheless, Uber CEO Dara Khosrowshahi thinks autonomy presents a staggering $1 trillion opportunity for the company in the U.S. alone.
Partnerships with autonomous titans like Waymo and Nvidia
Khosrowshahi says Uber is spending an enormous amount of organizational energy executing on its autonomous strategy, even though it might be a few years before self-driving cars are widely available. The company has inked partnerships with over a dozen companies developing autonomous solutions, including Alphabet's Waymo, WeRide, Motional, Serve Robotics, and even Nvidia.
Waymo is ahead of the pack right now because it's already completing over 150,000 paid autonomous trips every week across Phoenix, San Francisco, and Los Angeles (many of which are through Uber). Later this month, Uber customers in Austin will be able to hail an autonomous Waymo, and the partnership will expand into Atlanta later in 2025.
Uber is also working with Serve Robotics to launch over 2,000 autonomous food delivery robots this year, which will operate exclusively on Uber Eats in parts of California and Texas. During the fourth quarter of 2024, Uber started offering autonomous food delivery in Austin and Dallas through a different partner called Avride.
Then, there is the interesting deal that Uber signed with Nvidia in January. Since Uber facilitated over 12 billion trips last year, it has mountains of useful data that could be used to train the artificial intelligence models underpinning most autonomous software. The company wants to use Nvidia's Cosmos platform and DGX Cloud to process that data and help its autonomous partners accelerate their journey to commercialization.
The faster autonomous vehicles are widely deployed, the faster Uber can unlock the significant cost savings I talked about earlier. Plus -- and this is just speculation on my part -- Uber could possibly unlock a new revenue stream by charging its partners for the use of its valuable data.
NYSE: UBER
Key Data Points
Ackman and Pershing Square could enjoy significant upside in Uber's stock
After deducting operating expenses like marketing and research and development from Uber's $43.9 billion in 2024 revenue, the company was left with a net income (profit) of $9.8 billion, which translated to $4.56 in earnings per share (EPS). That places Uber stock at a price-to-earnings (P/E) ratio of 16.3, which is a whopping 51% discount to the P/E ratio of the Nasdaq-100 technology index (33.6).
Uber stock is remarkably cheap from that perspective, so it's easy to see why Ackman thinks it's a bargain right now. However, the company benefited from one-off tax benefits worth $5.7 billion in 2024, so its actual earnings were much lower in reality. In fact, according to Wall Street's consensus forecast (provided by Yahoo), Uber's EPS could shrink by 46% this year to $2.44 as those benefits disappear.
That places Uber stock at a forward P/E ratio of 30.5, but that's still quite attractive. If we assume the P/E ratio of the Nasdaq-100 remains constant, the stock would have to climb by 10% in 2025 just to trade in line with its big-tech peers. Plus, Wall Street is forecasting 36% EPS growth for Uber in 2026, which is likely to drive even further upside in the stock in the medium term.
However, for the reasons I highlighted earlier, autonomous driving might be the best reason to own Uber stock for the long term. If it truly does become a $1 trillion tailwind as Khosrowshahi expects, the stock is likely very undervalued right now.
