Making specific predictions about a stock or its underlying company can be a tricky business. That's why most investors don't do it. They instead just choose to buy compelling high-quality prospects on faith that -- in time -- they'll be fairly rewarded for the risk they're taking.
Every now and then though, there's value in the exercise of making some specific numbers-based projections, if only to help you get a handle on a company's potential upside.
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To this end, here's a five-year outlook for ride-hailing outfit Uber Technologies (UBER -2.40%).
Where Uber is now
You know the company. While it didn't start the ride-hailing industry, it did arguably usher it into the mainstream. The business has evolved from its first hailed ride in 2010 to nearly 11.3 billion trips last year alone, handled by more than 8 million drivers who generated more than $44 billion in revenue and $7 billion worth of operating cash flow, extending trends that have been in place since its inception. And shareholders have been well-rewarded for their patience.
More of the same sort of growth is on the way, too. The analyst community is calling for a top-line improvement of nearly 20% this year en route to next year's sales growth of more than 15%.
Data source: Simply Wall St. Chart by author.
That's still just the beginning, though. Industry research outfit Mordor Intelligence believes the global ride-hailing business is set to grow at an average annual pace of 16.6% through 2030, which would more than double its size between now and then. And that's just ride-hailing. Uber is also operating within the food-delivery space as well as doing same-day deliveries of online orders of non-food goods. Mordor believes the former is poised to grow by more than 11% per year for the same timeframe, with the same-day logistics market expected to match that growth pace for the same five-year stretch.
What gives? This company and its peers are simply cashing in on the waning interest in owning a car, or even being licensed to drive one! Citing reasons ranging from cost to inconvenience to the advent of viable alternatives like ride-hailing, a recent survey performed by Deloitte says -- in contrast to the 55-and-up crowd -- 44% of U.S. consumers between the ages of 18 and 34 would be willing to give up ownership of a vehicle.As these younger people age, they're passing along their preferences to their children.
Predictions about Uber
Given its historical growth rates paired with analysts' outlooks for where each of Uber's businesses is going, we can come up with a reasonable guess as to where Uber Technologies will be five years from now.
First, there's its business mix.
As it stands right now, personal mobility is its biggest profit center. Nearly $7.3 billion of Q2's revenue came from ferrying passengers, while $4.1 billion came from delivery operations like Uber Eats. Each grew about as quickly as the other. Meanwhile, Uber's freight arm only did a little less than $1.3 billion in business last quarter, flat with 2023's comparative tally. All of these are apt to continue growing going forward. However, given their historical growth rates and how well Uber is building its business on this front, it's arguable that its delivery arm is likely to be bigger than its mobility business by 2030.
That's not necessarily a good thing, though. See, Uber's EBITDA rate on delivery is about half that of personal mobility. These margins might widen with scale. If they were going to widen significantly, though, we'd likely have seen it start happening by now.
As for what this growth means in terms of revenue and profitability, this is a case where analysts' expectations hold water. The ride-hailing sliver of the crowd-sourced mobility market is indeed likely to double in size over the course of the coming five years. With control of about three-fourths of the U.S. ride-hailing business (according to Bloomberg) and a respectable presence outside of the United States as well, Uber Technologies is positioned to capture at least its fair share of this growth, doubling its annual sales from $44 billion now to something in the ballpark of $90 billion then. Presuming more scale will lead to at least somewhat wider profit margins, don't be surprised to see this company's annual net operating income improve from last year's $2.8 billion to at least $10 billion by 2030, versus an annualized run rate of $6 billion as of the second quarter of this year.
The trickiest prediction to make here is, of course, with Uber's stock. We know the market's pricing in its plausible future more than it is pricing in the company's present. We just don't know to what extent it's doing so. Coming up with a specific number requires a reasonable guess as to how the market will feel about Uber in five years' time. That's a tall order to be sure.
As far as one can get a read on this sort of dynamic though, Uber stock could conceivably be trading at $200 a share within the next five years. Trading at a forward-looking price/earnings ratio of 34, valuation isn't apt to become a major challenge as the company grows between now and then.
The one thing that won't be a factor in 2030? Autonomous vehicles providing personal mobility services. Although CEO Dara Khosrowshahi is optimistic about their potential, he doesn't believe the technology will be ready for at least another 10 years, if not longer.
Not the reason you'd want to own Uber stock
Take all of these predictions with a grain of salt, of course. Although well-reasoned based on actual historical trends and analysts' experienced feel for how the mobility business is evolving, nobody really knows for sure.
The thing is, not knowing for sure doesn't mean Uber stock isn't worth owning or stepping into for the long haul here. It's clearly a growing company, and is clearly plugged into a societal dynamic that's sure to continue spreading for the foreseeable future. That's about all any investor can reasonably ask for in a growth name.
This might help: Of the 57 different analysts who currently cover Uber Technologies, 40 of them rate Uber stock as a strong buy. None of them considers it anything less than a hold. That's a pretty healthy vote of confidence.
