Uber Technologies (UBER 1.85%) recently entered correction territory. The stock of the global rideshare leader is stuck in a trading range, with no clarity on when it might break out.
Admittedly, a 14% pullback may not sound like a compelling discount. Still, with its remaining growth potential and low valuation, investors may have an opportunity that's too potentially lucrative to ignore. Here's why.
The state of Uber
Uber has emerged as the global leader in transport. In 2024, 57% of its revenue came from its mobility segment, where it leads the world in rideshare.
Despite competing with Lyft in the U.S. and other rideshare services worldwide, Uber has emerged as one of the world's most recognized brands in the rideshare space. Currently, it offers rides to customers in more than 15,000 cities spanning 70 countries.
Around 31% of its 2024 revenue comes from its delivery segment, which operates as Uber Eats. As the name implies, its drivers work to deliver food to customers. Although the company lags behind market leader DoorDash in this segment, it has leveraged the Uber name to become the second-largest food delivery company in the U.S.
Despite its expanse, many options for growth remain. It has found success in Uber One, a membership program offering customers both perks and savings for frequent Uber and Uber Eats customers.
Additionally, it is working on an autonomous driving segment. This partners with Alphabet's Waymo and General Motors subsidiary Cruise on driverless transport. This could place Uber's popular platform in the center of the self-driving car market, and the potential for Uber to depend less on drivers could dramatically improve Uber's profitability in the future.
The remaining 12% of the business involves freight deliveries. While this has not been a fast-growing segment of Uber, it has given customers an end-to-end logistics option to book, manage, and track freight shipments.
Uber by the numbers
These segments combined to deliver $44 billion in revenue to Uber in 2024, an 18% increase over the previous year. Not surprisingly, the 26% growth in its mobility segment carried the company. The delivery segment grew by 13%, while Uber's freight revenue dropped by 2%.
Uber also limited the growth in costs and expenses to 13%. Consequently, its 2024 net income came in at $9.8 billion, a substantial increase from the $2.2 billion it earned in 2023. Indeed, most of that rise came from a $5.8 billion tax benefit, but even when removing that one-time tax break, it experienced a massive increase in year-over-year profit growth.
Moreover, even though the stock dropped slightly in value over the last year amid range-bound trading, it is up more than 25% since the beginning of the year, and it might finally have reached a point where the stock can resume its growth.
NYSE: UBER
Key Data Points
Thanks to the tax benefit, its recent P/E ratio is just 17, likely meaning the forward P/E ratio might better reflect its true valuation. However, its forward multiple comes in at a relatively reasonable 23. While still well above Lyft's forward P/E of 11, it remains significantly cheaper than DoorDash, which trades at a 42 times forward earnings, likely pointing to an opportunity to buy the mobility leader at a significant discount.
Buying Uber stock
Amid a move into correction territory, Uber stock remains a buy.
Indeed, its struggles have brought about the 14% decline and a period of stagnation, which may not appeal to bargain hunters as much as the pullbacks of more than 50% one often experiences in some top stocks.
Nonetheless, despite a one-time bump in earnings, Uber's double-digit revenue growth should bring profit increases over time. With its leadership in mobility and its significant potential to profit from autonomous driving, investors have good reason to believe this transportation stock can beat the market over time.
