Uber (UBER 0.96%) is a category-creating business whose innovative and disruptive DNA has built an entirely new industry in the form of on-demand ride-hailing. The business is now a household name, with the brand often being used interchangeably as a verb. This highlights Uber's mindshare among consumers. It's hard to overstate this positioning.
Shares have performed very well in the past. Over the trailing five-year period, they have soared 174% (as of Oct. 17). But they're taking a breather, down 8% from their peak. Maybe now is a good time to put some money to work.
Where will Uber stock be in five years?
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Investors should see the present situation clearly
As a major success story of the internet age, Uber provides a compelling value proposition to its stakeholders, which is obviously why it has become such an outstanding business. A good way to tell a company's quality and the importance of its products and services is to think about a scenario where the business didn't exist. Under that lens, it's clear that Uber provides lots of value.
The company continues to perform at a high level. During the second quarter, Uber's gross booking value (GBV) soared 17% year over year, which boosted revenue by 18%. This growth has occurred during a period of general economic uncertainty, which makes it more impressive. As of June 30, Uber had 180 million monthly active users, showcasing its huge size.
Operating from a powerful competitive standpoint, it possesses a network effect, which allows the platform to get better as it gets larger. In any particular city, riders benefit from the presence of more drivers, and vice versa. This situation can reduce wait times, keep pricing in check, and maximize the earning potential for drivers. Add more restaurants to the mix, and the same thing applies.
As things stand today, it's difficult to see Uber getting disrupted (more on this below). The company has become an important part of people's daily lives.
Uber's business will be larger in 2030
There's no reason to believe that Uber's trajectory will change as we look to the next five years. In other words, the business should be bigger at the end of the decade, with more users, higher revenue, and greater GBV.
One notable area where management can drive growth is to increase the frequency with which users engage with the platform. Data from the end of 2023 shows that 50% of people only use the ride-hailing service once or twice per month.
Uber is so far doing a great job leaning on a unique advantage, which is its ability to collect vast amounts of data. Leveraging this has spawned a new revenue source. Earlier this year, Uber was generating $1.5 billion in annualized run-rate ad sales. This segment is growing at a robust pace.
The potential of autonomous vehicle (AV) technology could also be a disruptive force to Uber's business model. For instance, if Tesla and Alphabet's Waymo find broad adoption and enter more markets around the globe, their competing ride-hailing services could lower prices, driving market share away from Uber.
But it's telling that Uber has entered into multiple partnerships in the space, as AV enterprises want to work with the company that controls demand and has a direct relationship with 180 million customers around the world. Uber looks to be well-positioned for any major technological shifts over the next five years and beyond.
NYSE: UBER
Key Data Points
Can the stock remain a winning investment?
The most important question for prospective investors is whether or not Uber can continue beating the market between now and 2030. It's certainly easy to be optimistic.
Wall Street consensus analyst estimates call for earnings per share to rise by 52% between 2025 and 2027. Add that favorable outlook to an attractive forward price-to-earnings ratio of 23.2, and you have what looks to be a good buying opportunity.
