uber investment thesis

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Uber in 2024: From Industry Disruption to Creating Value For All Stakeholders

Dara Khosrowshahi became the CEO of Uber in August 2017, following internal turbulence and serious headwinds related to the company’s governance and reputation. Five short years later, Uber was clearly back on course, building on the success of its technology platform to reach 150 million monthly active platform users—and a market cap of $125 billion by the end of 2023.

This case study traces the remarkable transformation of Uber from its early innovation as a ride-hailing pioneer in a handful of cities, to the global expansion of Uber mobility services that required close attention to local operational and regulatory practices, to solving the complex technical challenges to drive Uber’s food delivery services forward. Interviews with Uber leadership reveals the strategic approach to work on the engineering, data science, product management, and product design challenges involved in building and maintaining a customer-friendly app and create an optimized user experience—and scale this on a global basis while factoring in local conditions and practices.

Key to this success was a culture reboot within Uber, and a renewed focus on collaboration and value creation for all stakeholders. The company that had found its initial footing by disrupting and transforming the taxi industry, more than a decade earlier, now faced a future where artificial intelligence and autonomous vehicles would likely disrupt the mobility sector once again—but Uber was preparing intensively for what the future might bring.

Learning Objective

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Uber Technologies, Inc. (UBER): A Bull Case Theory

In this article:.

We came across a bullish thesis on Uber Technologies, Inc. (UBER) on Rijnberk InvestInsights’s Substack by Daan Rijnberk. In this article we will summarize the bulls’ thesis on UBER. Uber Technologies, Inc. share was trading at $70.11 as of Sept 11th.

Uber's stock, while reaching an all-time high of over $80 earlier this year, has seen a modest 12% gain in 2024, aligning with the broader market. Despite this, Uber’s business is thriving and surpassing many expectations. The company has achieved impressive top-line growth, consistently increasing revenue by high-teens to low-twenties percentages, and is now generating EBITDA in the 40% range. This strong financial performance is complemented by GAAP profitability and accelerating free cash flow (FCF), underscoring Uber's successful operational strategy and market dominance.

A close up view of a hand holding a smartphone, using a ride sharing app.

In the global ride-hailing market, Uber stands out as the clear leader with a substantial 25% market share, overshadowing competitors like Lyft, which holds only 8%. Uber’s financial robustness and expansive market presence create a significant competitive advantage, allowing it to maintain attractive pricing and availability. This dominance is reflected in its $30 billion brand value, marking a 28% year-over-year increase, and its growing footprint in the global taxi network. The ride-hailing industry’s projected 13% compound annual growth rate (CAGR) bodes well for Uber, which is expected to continue outpacing this growth, sustaining mid- to high-teens growth rates.

In the delivery sector, Uber faces competition from major players like DoorDash and various European companies but remains at the forefront in seven out of its top ten markets. The company's continued market share gains and the projected 9% CAGR for the delivery industry suggest Uber’s ability to achieve double-digit growth in this segment as well. With significant room for expansion and a burgeoning advertising business now generating over $1 billion in revenue, Uber’s growth prospects are promising.

Uber’s impressive Q2 results highlight its operational success, with trip growth at 21% year-over-year and gross bookings increasing by 19% to $40 billion. Both the mobility and delivery segments have shown strong performance, with adjusted EBITDA climbing 71% to $1.6 billion, reflecting substantial margin improvement.

Despite facing economic uncertainties and recession fears, Uber’s management maintains a confident outlook, projecting continued robust growth. The current valuation, with an EV/EBITDA multiple around 24x, reflects the company’s potential. With a target price of $80 based on an expected 10x multiple, Uber’s shares offer attractive returns, with over 12% annual growth potential from the current price of $69. For long-term investors, Uber’s growth trajectory and solid financial position make it a compelling buy, especially if the stock dips to the $60-$65 range.

Uber Technologies, Inc. is on our list of the 31 Most Popular Stocks Among Hedge Funds . As per our database, 145 hedge fund portfolios held UBER at the end of the second quarter which was 130 in the previous quarter. While we acknowledge the risk and potential of UBER as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than UBER but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock .

READ NEXT: Analyst Sees a New $25 Billion “Opportunity” for NVIDIA and 10 Best of Breed Stocks to Buy For The Third Quarter of 2024 According to Bank of America .

Disclosure: None. This article was originally published at Insider Monkey.

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Understanding Uber: Innovation in Motion

Uber has rapidly transformed mobility across the globe through operational excellence, product innovation, and strategic investment in competitors. As Uber continues to expand, the company is leveraging its technology and data platform to transform other businesses that rely on transportation such as meal delivery and freight. With over 15 million trips completed every day and more than 10 billion trips completed since its inception in March 2009, 1 Uber has established itself as a dominant player in the transportation realm.

What can marketplace founders and investors learn from Uber’s path to IPO? Here are five drivers that were instrumental to Uber’s success:

Though unprofitable today, strong unit economics show a clear path to net income: Uber’s payback period is expected to be fewer than 4 months.
Massively scale the creation of marketplaces through repeatable playbooks and data democratization.
If you can’t beat them, join them: Opportunistically create value in international markets through partnerships and investments when stand-alone strategy is unviable.
Drive share of wallet (for riders) and share of income (for drivers) through incremental services.
You don’t have to be first, but definitely need to be fast.

1. Though unprofitable today, strong unit economics show a clear path to net income: Uber’s payback period is expected to be fewer than 4 months.

While unprofitable now, Uber’s upfront investment paired with effective execution can fuel future growth and long-term potential for value-creation. In Uber’s case, the company’s operating margin at the time of IPO is at -27%, only higher than that of Lyft and Snap when compared with recent consumer tech IPOs.

2. Massively scale the creation of marketplaces through repeatable playbooks and data democratization.

Uber has scaled impressively, and now operates in over 700 cities throughout 63 countries across the world. 5 Uber’s ability to scale rapidly is driven by its methodical, franchise-like approach to expansion, in the form of a repeatable “playbook.” This playbook focuses on growth, strong operations, and managerial autonomy. For each new market, a city general manager is hired, who then hires operations and community managers. Unlike purely digital businesses, having a physical presence in a new market is critical for Uber. The playbook’s strong operational focus creates a robust infrastructure to effectively onboard drivers, verify paperwork, and interact with local officials on the ground. The general managers are given autonomy to shape the playbook to fit the local market’s needs, enabling Uber to rapidly tap supply-rich markets and scale the business.

3. If you can’t beat them, join them: Opportunistically create value in international markets through partnerships and investments when stand-alone strategy is unviable.

4. Drive share of wallet (for riders) and share of income (for drivers) through incremental services.

5. You don’t have to be first, but definitely need to be fast.

Though Uber is currently the global ridesharing leader, the company was actually a fast follower in the sector. Competitor Lyft and former competitor Sidecar (which shuttered back in 2015) actually pioneered ridesharing as it is known today, which entails using non-professional, non-commercially insured vehicles and drivers. In fact, Uber initially worked exclusively with commercially licensed, insured and regulated entities (known as Black Cars in many areas) before transitioning to the current ridesharing model. 16

As a fast follower, Uber executed and expanded rapidly and relentlessly, providing consumers around the world with a convenient and reliable ridesharing experience. The company utilized its playbooks and data-driven decisions to drive operational excellence, leading to market dominance in many regions. In fact, Uber followed a market entry pattern that has proven successful for business entities in the past – Myspace preceded Facebook, Yahoo preceded Google, and Blackberry preceded Apple’s iPhone. Historical patterns of transformation suggest that being first does have its advantages, but entering the market early and iterating quickly is even more vital when it comes to dominating a market.

Uber, https://www.uber.com/newsroom/company-info/
Unit economic analysis assumes the following: 1) average MAPC is the midpoint of the quarter and grows linearly from each reported quarterly MAPC, 2) Second Measure retention of Uber U.S. ridesharing 2018 cohorts that flatten at 21% in Month 4 is applicable to all acquired MAPCs, 3) average fare and ridesharing take rate from Uber S-1, and 4) GAAP gross margins excluding excess driver incentives and driver referrals
UBER S-1, at page vi.
UBER S-1, at page 2.
UBER S-1, at page 1 – 2.
Uber, https://www.uber.com/en-AU/blog/melbourne/transportation-that-is-as-reliable-as-running-water/
TechCrunch, https://techcrunch.com/2011/12/05/uber-launches-its-first-international-efforts-in-paris/
Bloomberg, https://www.bloomberg.com/news/articles/2014-11-20/ubers-international-launch-playbook-includes-some-tough-lessons
TechCrunch, https://techcrunch.com/2022/09/11/uber-global-exits-billions/
UBER, S-1, at page 108.
The New York Times, https://www.nytimes.com/2022/09/10/technology/uber-ipo.html; Forbes, https://www.forbes.com/sites/greatspeculations/2018/12/24/is-80-billion-valuation-achievable-for-didi-chuxings-ipo/#5a3cb6636211; EWDN, http://www.ewdn.com/2018/11/02/yandex-taxi-asserts-market-leadership-announces-new-acquisitions/
Business Insider, https://www.businessinsider.com/uber-public-transit-launches-in-denver-mobile-bus-and-train-tickets-2019-1
Uber, https://www.uber.com/us/en/elevate/
UBER S-1, at page 5.
UBER S-1, at page 8.
Internet Archive The Wayback Machine, https://web.archive.org/web/20150910144736/https://newsroom.uber.com/2013/04/uber-policy-white-paper-1-0/

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Is Another Trillion-Dollar Stock Hiding in Plain Sight?

The company's top and bottom lines are improving dramatically, thanks to a combination of savvy acquisitions and a loyal customer base.
Uber stock appears to be undervalued and could be headed to all-time highs.
Motley Fool Issues Rare “All In” Buy Alert

Uber Technologies

Despite its run so far in 2023, Uber stock looks unstoppable.

For the last several months, financial headlines have been dominated by Big Tech's progress in artificial intelligence (AI). One of the more subtle tech success stories in 2023 is Uber Technologies ( UBER 6.45% ) , a stock that is up an eye-popping 95% year to date.

Despite this momentum, several on Wall Street believe the best is yet to come. Uber stock could very well be headed to all-time highs. Moreover, after learning more about its business, some investors may be compelled to hold the stock for the long term, as Uber could be headed toward a very exclusive club.

More than a side gig

Uber is definitely one of the pioneers of the gig economy . But what started off as a new, innovative way to hail a taxi has evolved into much more than on-demand rides.

Uber currently segments its business into three categories: mobility, delivery, and freight. Mobility is where the company's roots lie and is its largest revenue driver. The delivery segment allows consumers to order from restaurants or even grocery and alcohol stores and have goods delivered to their door. Lastly, the company's smallest segment, freight, is Uber's homegrown logistics marketplace.

By expanding into other products and end markets, Uber has been able to separate itself from the competition. Moreover, these augmentations to the business directly impacted Uber's financial results across the top and bottom lines.

For the first quarter of 2023, Uber grew its revenue 29% year over year to $8.8 billion. Additionally, the company's net loss of $157 million, or $0.08 per share, illustrated that Uber is very close to breakeven and potentially turning profitable.

From a geographic standpoint, Uber's Europe, Middle East, and Africa (EMEA) segment grew by 86% in Q1, higher than any other region. I found this particularly encouraging because just a few days ago, Joe Terranova of Virtus Investment Partners made an interesting point during an interview on CNBC that Europe is currently in an economic contraction. For this reason, Uber is likely not experiencing peak demand and business in this region, implying there is much more opportunity there.

This observation becomes even more relevant when you consider that Uber boasts 130 million monthly active platform consumers (MAPCs). Given that this figure is likely deflated due to hazy economic conditions, long-term investors should be encouraged as Uber still has mammoth potential.

A person uses a ride-hailing app on their phone.

Image source: Getty Images.

On top of these growth prospects, one of the savvier moves Uber has made is how it allocates capital. Over the last few years, the company has made some splashy acquisitions -- namely, alcohol delivery service Drizly and food delivery platform Postmates. Furthermore, Uber invested billions of dollars in tangential services. For example, the company has equity stakes in electric scooter company Lime, as well as Grab , a competing service to Uber in Southeast Asia.

These moves have directly impacted Uber's business, especially as it pertains to the mobility and delivery segments. As Uber continues to build its empire, it is tempting to think the company may be on its way to the trillion-dollar club.

The valuation is compelling

To be up front, Uber is still far from a trillion-dollar market capitalization . The company's current market cap is $95 billion, implying it needs to 10x from here to reach a trillion.

Nonetheless, Wall Street seems to be buying into Uber's investment thesis. JPMorgan , in particular, recently listed Uber as one of its top picks. Moreover, in July alone, several financial institutions, including Evercore , Roth MKM, and Tigress Financial, published research reports with "buy" or "buy equivalent" ratings on Uber stock.

Among this cohort, the estimated price target for Uber stock ranges from $59 per share to $75 per share, implying the growth stock is massively undervalued and could surge as much as 60% from current trading levels.

Bearing that in mind, long-term investors should zoom out and take a close look at Uber's valuation ratios. As of the time of this article, Uber trades for 2.8 times price to sales (P/S). Considering the company is knocking on the door of profitability and has demonstrated its ability to identify and integrate acquisitions to make inroads in new end markets and jump-start growth, investors could argue that Uber stock is trading at a discount.

For what it's worth, investors may also want to consider that Uber topped The Motley Fool 's list of undervalued growth stocks in 2023. A prudent strategy is to dollar-cost average into the stock over the long term and keep an eye out for growth across all segments and geographies, expanding margins and its profitability profile.

JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Adam Spatacco has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Grab, JPMorgan Chase, and Uber Technologies. The Motley Fool has a disclosure policy .

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Our Analysis of UBER (Updated)

October 14, 2021

I re-share and update my analysis of Uber, and why it remains an attractive investment. I provide a mental model of how to analyze companies that may appear expensive but have yet to reach escape velocity in their cost structure and have a large market addressable market that they’ll likely dominate.

October 2021

I talked about why we – value investors – decided to buy Uber stock back in January 2020, a month before the pandemic really got rolling. We were buying Uber stock throughout the pandemic, even in the very dark hours of March 2020. We still own it today and were buying it as recently as August.

A lot of things have changed since January 2020, but overall our thesis is still intact and has even gotten better. Uber Eats will likely turn into a viable, profitable business. Uber is expanding into adjacent delivery markets for groceries, alcohol, and packages. Advertising will become a meaningful business for Uber (it has almost a 100% margin). Uber took the pandemic as opportunity and rationalized its cost structure, cutting a quarter of its workforce. Uber announced that it has turned EBITDA-profitable in recent months. I know, it seems like a low bar for a company of this size, but it is a first step to reaching escape velocity to significant profitability as revenues continue to grow.

Below is my original analysis. It’s long, but worth revisiting today.

January 2020

This had never happened before. Several clients reached out to us wondering if I had been kidnapped and someone else was making investment decisions in their accounts. The gist of their questions was, how you can go from making conservative investments to buying a dotcom-like stock that is losing money? How can this company even be a value investment?

I was happy to get these questions, for two reasons. First, it’s clear clients are paying attention to what is going on in their accounts. I really want IMA clients to know what they own and, most importantly, why the own it. This is why I write long quarterly letters to them about their investments. And second, the questions have allowed me to measure the temperature of people’s opinions about the company in question.

What and Who

Let me introduce you to our What, Who, and How Much framework.

Imagine you are in 1998; this new internet thing is complete chaos; it’s the Wild West. Wild West because there are a lot of possibly very profitable and certainly disruptive business models emerging. Chaos because it’s incredibly difficult to see which business models and which companies are going to succeed. So in 1998 you don’t know what and don’t know who .

Fast-forward to … 2003. At this point we can clearly see that advertising and classifieds dollars will shift online. We know what will happen. But we still don’t really know who – the market is very fragmented and no obvious leader has emerged. Yahoo!, Ask, Bing, AltaVista, MySpace, and Google are still duking it out for market share.

Fast-forward again to 2010. At this point no one has any doubt that digital advertising is the future and analog (or paper, to be more accurate) is a relic of the past. Any ambiguity is removed from what , and the who is Google (and Facebook, but I’ll ignore Facebook here for the sake of simplicity). Google has become a verb; the company dominates search – its biggest competitor at this point is Bing, which has a tiny, shrinking 2.5% market share. People are Googling, not Binging.

Google’s scale gives it an enormous competitive advantage: The more data it has from past searches, the better results it can provide for future searches. Google made some brilliant decisions along the way. Instead of fighting Apple in its own domain, it gave away the Android operating system to hardware manufacturers. Today Android powers half of the mobile phones sold in developed countries and 80% of phones globally.

The problem is that, with the exception of a very few moments in 2010, Google has looked statistically expensive on the basis of current or next-year’ earnings. However, if you looked five or ten years out, you’d have realized that digital advertising would be taking market share from analog and thus would double and then quadruple. Since Google was the who (its dominance was likely to grow), it would capture the bulk of the profit from growth of the search engine advertising market. If you looked at Google’s earnings power through a spyglass instead of a microscope, it was insanely cheap and significantly undervalued, though it would not show up on a single value screen.

Here is what we learned from this: When we see a tsunami of disruptive change (the what ), we need to identify the who .

A lot of times it is easier to identify the what than the who . For instance, we spent a lot of time looking at the legalization of online sports betting in the US – it is clear to us that this industry will explode. But we could not identify the who – a company that today we can clearly see will be able to capture a meaningful chunk of the profits in five or ten years. A few years down the road it will be easier for us to see which companies will dominate that space, but we will have paid a price for this insight, because the who will have appreciated a lot by then. At the same time, there will be a lot of companies that looked like reasonable contenders but vanished from the map. So identifying the who is not always easy.

Finally, how do you figure out how much ? This is where it gets really difficult, because you can’t build models analyzing these companies with any kind of precision; you need to put your sharp pencil away and take out a crayon. Here is where the first three of our Six Commandments of Value Investing come to the rescue. First, margin of safety: Make sure you buy cheap enough that if the future is not as bright as you anticipate, you don’t lose money. Which brings us to the second commandment: The true risk is not volatility – temporary gyrations – but permanent loss of capital – a stock declining and not coming back. And finally, have a long-term time horizon. When you look at the who in the industry, ask yourself, five years out, what is my most conservative, most uncreative estimate of value? These types of companies have a good chunk of their value not in today’s but in future earnings. Using conservative estimates of revenue and earnings growth and giving them a conservative valuation multiple five years out, you can arrive at a worst-case valuation. If your current price is not much different from this number, you have a margin of safety.

This brings us to the what : what’s the industry that we foresee to have explosive future over the next few years?

That’s a long discussion. So long that I’ve broken it up into a 4-part email series. If you want to read the whole thing, you can sign up using the form below:

Key takeaways

Our “Uber analysis” from January 2020 remains largely intact, with improvements in areas like Uber Eats, expansion into adjacent markets, and recent EBITDA profitability.
The “What, Who, and How Much” framework is crucial for our “Uber analysis” and similar investments in disruptive industries, helping us identify transformative trends, market leaders, and valuation.
In our “Uber analysis”, we saw ridesharing as the “what” – a disruptive industry with explosive future growth potential, and Uber as the “who” – the likely market leader.
Determining “how much” in our “Uber analysis” required looking beyond current financials to potential earnings power 5-10 years out, using conservative estimates to ensure a margin of safety.
Our “Uber analysis” exemplifies value investing in disruptive companies, which may appear expensive based on current metrics but can be significantly undervalued when viewed through a long-term lens.

Please read the following important disclosure here .

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1 thought on “our analysis of uber (updated)”.

Greetings Mr. Katsenelson,

The investment analysis of Uber was very good, imo. But it is a bit outdated versus the current environment in April of 2024. Robotaxies have made a lot of progress and there is already a commercial robotaxi service in Las Vegas. Waymo is looking to expand to something like 14 more cities in the next year or two. Tesla is also pushing hard on FSD and robotaxies. And there is a lot of progress on robotaxies in China.

Consequently I think it is critical to revisit the potential robotaxi impacts on Uber. Various pundits are predicting robotaxies will have very low per mile cost (.25/mile, for instance). We are starting to see announcements from CATL of batteries that will last 1 million miles, and a number of supposed experts (Tony Seba, et al) think EVs will last 1 million miles, which is probably 5X the lifespan of an ICE based car. There are lots of other important cost data points (insurance, parking, yada yada). Bottom line I think EV robotaxies in 3 years will indeed be way way cheaper than the cost of a private automobile.

If so, this will supposedly drive a material reduction in personal car ownership which may end up being 50%+ lower eventually. So we may end up with a market dynamic where car companies end up in a rapidly shrinking market with the main opportunity for retaining market share coming from robotaxies. Competition could be fierce in that environment among car makers.

If so, then the ability to scale rapidly (whoever gets biggest the fastest wins) might drive robotaxi manufacturers to partner with Uber rather than compete heads up. If so, Uber would see very fast growth as the total ride share market expands as people choose ride sharing over buying and operating private cars.

Alternatively, it may turn out that replicating enough of Uber’s software infrastructure to enable robotaxi services turns out to not be that difficult, and robotaxi companies that choose to compete heads up with Uber will not have the challenges of firing millions of drivers. Vertical integration may provide much better margins. Tesla appears to be headed that direction.

The above is just an attempt to poke at some of the more obvious potential impacts. But I am hoping it drives home the point that robotaxies will have a huge, and perhaps existential, impact on car companies and possibly Uber. Getting a handle on the various future robotaxi scenarios and their probabilities seem crucial to your Uber investment thesis going forward.

Most investors I talk to feel that robotaxies are 10 years away and not worth worrying about in regards to Uber’s future. I disagree. My sense is we will start to see the rollout of robotaxies in 2-3 years in geofenced areas in large cities and associated urban areas (already plans for that for SF and peninsula and LA).

It also seems important to assess what impact robotaxies will have on Uber’s network and platform moat.

It would be very useful, and perhaps essential, to Uber stock owners to get an up-to-date analysis of robotaxies, their potential timing, and potential impacts on Uber. I am hoping you may be inclined to provide such an analysis! I believe it would attract a lot of interest.

Anyway, this was a great article and very worth reading.

Best regards, Tim Sharick

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Growth vs. Profits: Uber’s Cash Burn Dilemma

January 24, 2017 • 13 min read.

Can global ride-hailing startup Uber slow its rate of cash burn before losses start to threaten the company’s viability?

As global ride-hailing startup Uber heads toward a possible IPO this year, Wall Street’s eyes will be on its financials. Revenues have continued to grow quickly for the eight-year-old Silicon Valley company, but the bottom line isn’t pretty: Uber was on track to lose about $3 billion in 2016 on net revenue of $5.5 billion, according to Bloomberg News. That’s remarkable for a startup that has raised more than $11 billion with scant capital costs — it does not own a global fleet of cars or much of other hard assets. Uber itself is valued at more than $60 billion.

Can Uber slow its rate of cash burn before losses start to threaten the company’s viability? On the surface, stemming the red ink doesn’t sound so hard. Since it does not own vehicles or employ drivers, the company saves a fortune in capital and workforce costs. But Wharton experts point to other substantial costs: In helping to create an innovative new market — the sharing economy — Uber spent a fortune training, recruiting and subsidizing drivers, giving away free rides so consumers would get hooked on the service, setting up a global system of local and regional offices as well as hiring lawyers to deal with lawsuits and regulators.

“I think Uber thought, ‘We have this platform — this app, this technology — that can be leveraged anywhere in the world, so let’s just go and conquer the world,’” says Wharton management professor Exequiel Hernandez, who wrote two case studies on Uber for his classes, based on interviews with executives. “What Uber underestimated were the costs that didn’t have to do with their technology and their business model, costs that have to do with the politics of being legitimate, [addressing] regulatory resistance and even cultural differences across markets.”

The idea for Uber came to co-founders Travis Kalanick and Garrett Camp one snowy evening in Paris when they could not get a cab. Camp’s first idea was to start a “limo timeshare service” where riders booked cars on-demand through a smartphone app to fill the down time of livery car services. Later, Uber expanded its options to add lower-price rides such as UberX, UberXL, UberSELECT; new premium services UberBLACK, UberSUV and UberLUX; and carpooling rides with UberPOOL. Uber now operates in more than 500 cities and 70 countries.

In helping to create an innovative new market — the sharing economy — Uber spent a fortune.

Uber’s innovation did not stop there. It applied the concept of “surge pricing” to its service — prices would go up when demand for cars in an area outstripped supply. The idea was that higher prices would prompt more drivers to come out until demand and supply reach equilibrium. Hernandez says Uber developed a dashboard that provided real-time supply-and-demand data in a city that helped managers see the high traffic areas they could send drivers to and adjust prices accordingly. Rides were booked by passengers using stored debit, credit or prepaid cards so they did not need to have cash on hand. Further, a bilateral ratings system rated both drivers and riders, creating a window into their behaviors.

While the practice of surge pricing isn’t new — airlines have been using it for years — it was new to car services. Uber’s brilliance was to get riders to accept the practice. “People got used to it” as long as the cost was transparent, open and fair, says Senthil Veeraraghavan, Wharton professor of operations, information and decisions. For example, riders ponied up $7 during busy times for a ride that normally costs $4. While there was an outcry initially when some New Year’s Eve revelers were hit with short rides costing hundreds of dollars, people have learned to plan for it. Uber also has come out with tips to avoid such surprises. “Uber tells people demand will be high so plan around it,” he says.

Wharton marketing professor Ron Berman notes that Uber operates in a classic “two-sided market” where Uber is the “market maker” between the driver and rider by providing a platform for them to connect. As such, he adds, there is a “strong network effect” taking place. “The more drivers there are on the road, the less time riders wait and the better service they get. [That brings in more riders, and] more drivers want to join Uber, since they know they will have high demand and less idle time.”

Bull and Bear Case

For this model to work, Uber needed to reach critical mass. The company’s pursuit of growth is largely the reason behind its rapid cash burn. Berman says that for companies to reach critical mass under these circumstances, they need to subsidize both sides of the market — pay them to join the system. He notes that the costs for Uber are high: “They are losing about $3 for each $1 they make.” However, getting to critical mass also typically results in a “winner-take-all effect,” which is what happened with Google in search and Facebook in social networks, he adds. “In this case, Uber’s strategy to try and grow as fast as possible at the expense of making a profit makes a lot of sense.”

Uber could be positioning itself to thrive in the long run. “Another way to see it is that Uber’s playing a very long game. We’re not used to startups playing such a long game. We’re used to startups eventually getting to something that makes them profitable, [going to] IPO and exiting,” Hernandez says. “The closest example we can find to Uber is Amazon, where [founder and CEO] Jeff Bezos was willing for decades [to prioritize growth over profits] — and even to this day, Amazon really hasn’t been a very profitable company.” Pundits also wrongly predicted Amazon’s demise.

Spending heavily to corner the market also makes sense from a regulatory standpoint. “If it were just about competing against [ride-hailing startup] Lyft and [Chinese rival] Didi, then there is some value to the argument that they’re burning cash too fast,” Hernandez says. “But the regulation angle actually justifies the cash burn.” Uber needs leverage, money and legitimacy in order to get regulators to accept its service even though it threatens the entrenched taxi industry in many cities. By subsidizing rides at first, Uber gets more people to use and like the service. That’s a major advantage when the company goes in front of regulators.

“It needs the public on its side and it needs ridesharing to be a significant portion of the economy so that regulators have an incentive not to kill it but to regulate it in a way that preserves jobs and infrastructure around ridesharing. That requires size,” Hernandez says. “You’re not going to the city council of New York and say, ‘We’re just a local New York company.’ Whereas if you say, ‘We’re everywhere and we have this brand and people love us,’ then you [become] the 800-pound gorilla.”

“We’re not used to startups playing such a long game.” –Exequiel Hernandez

According to Wharton management professor Tyler Wry, the cash burn is less problematic when considering Uber’s growth plans. “They’re trying to dominate that space. With that much capital on hand, they have the ability to expand rapidly, saturate different markets and effectively block out competitors without worrying about getting themselves into a liquidity crunch.” He adds that investors who agree with Uber’s spending strategy would be on board with the risks.

The bear case for the cash burn is that Uber’s tactic of lowering prices to get more riders, even if it means taking a loss, is problematic in the long run. In order to succeed, “that strategy would count on its dominance of the market after all significant incumbent taxi businesses exit,” says Arkadiy Sakhartov, a Wharton management professor. “I do not believe the strategy would be sustainable.” For example, he notes that it costs him $95 to take a taxi to the airport from his home, compared to $32 for Uber. The taxi industry knows how much it takes to make money on the ride. For Uber to make a profit on the same ride, it would have to lower its costs by three times, which is unlikely.

Uber’s rapid global expansion also doesn’t come cheap. “Uber is trying to take on too much. It’s burning too much cash in too many foreign markets,” Hernandez says. “It’s expensive to operate and compete in different markets.” In contrast, U.S. rival Lyft has pursued a U.S.-centric strategy and has chosen to partner abroad. However, Minyuan Zhao, Wharton management professor, says she would not compare the two because they are pursuing different goals, time horizons and attract different investors. While there are justifications to Uber’s strategy, a case could be made that the company might be “too ambitious for its own good.”

Another source of Uber’s cash burn are its investments outside of its core ride-hailing service for consumers. Uber has launched UberEATS, a food delivery service, UberCHOPPER for requesting a helicopter and UberFreight for long-haul trucking, among others. But these could be distractions. “Trying to execute on multiple fronts can dramatically increase the complexity of a firm’s operations and split its focus. This is mitigated to some degree when different business lines build on the same underlying competencies, but it’s still a concern,” Wry said.

Complexities of the Global Market

Hernandez predicted early on that Uber would not succeed in China. “I think the exit from China actually proved perhaps they were being too cavalier about where they went.” In August 2016, Uber left the China market after a bruising fight with local rival Didi, losing a reported $1 billion a year . Uber traded its Chinese operations for a 20% stake in Didi while the Chinese startup said it would invest $1 billion in Uber. One reason Uber failed is “they weren’t going to win the regulatory battle there. The Chinese government favors local companies when they compete against foreign ones in China,” he adds.

“With that much capital on hand, they have the ability to expand rapidly, saturate different markets and effectively block out competitors without worrying about getting themselves into a liquidity crunch.” –Tyler Wry

Uber also misread Continental Europe. “They didn’t understand that … in Germany, Spain or France, this idea that ‘we’re providing an opportunity for the driver to be an entrepreneur’ doesn’t fly because people care much more about labor security and labor protection,” Hernandez says. Meanwhile, Uber is doing well in Latin American markets such as Mexico despite the opposition from taxi drivers. “In Mexico, where taxis are old and dirty and … expensive, even the mayor of Mexico City was on Uber’s side,” Hernandez notes. “The value proposition Uber brings is different.” The Middle East also seems to be a robust market for Uber. However, Asian markets remain a mixed bag for now.

The larger lesson for Uber is that it needs to better understand cities before it decides to enter them. While Uber can run the tech platform from its headquarters, most facets of its operations are local: drivers, riders, regulators, prices, cultural practices, among others. Uber understood this dichotomy from the start, but its operating model veered between centralization on the tech side and hyper-localization on operations, Hernandez says.

Indeed, problems arose when the objectives of the team doing the centralized launch clashed with those of the local operations team. “The operations team … focused on creating a sustainable operation. In contrast, the performance of a launcher was measured by the speed with which they opened a new city,” he wrote in his Uber case study.

For example, when a launcher negotiated unsustainably high commission rates with local drivers to get more cars on the road quickly, an operations manager complained. (Uber typically took a 20% to 25% commission on rides, Hernandez says.) Later, Uber realized it could save money by reorganizing into regional hubs instead of being hyperlocal. Now, regional managers make decisions for cities.

At least, Uber’s famously pugnacious approach to regulations seems to be softening a bit. Hernandez points to CEO Kalanick’s 2015 conference speech in Germany as signaling a shift from the company’s aggressive “principled confrontation” approach. His speech was titled, “Uber and Europe: Partnering to Enable City Transformation.” More recently, Uber said it would share anonymous, aggregated trip data with city officials. Such travel data could help cities decide where to invest in infrastructure to alleviate traffic, among other benefits.

Uber’s Future

To be sure, Uber still faces many challenges. Additional regulations could curb its growth, and lawsuits, such as ones to classify its drivers as employees with benefits, could substantially increase its costs. It already lost one such case in London last fall and settled two others. Uber also faces taxation, such as an 18% value-added tax Russia levied on electronic goods and services provided by global tech companies that took effect this year. Uber has said it would reimburse drivers , but the additional paperwork prompted some to quit.

“By undercutting prices and heavily investing in its technology, Uber may accept losses now because it counts on the future advantage of combining its business format with driverless vehicles.” –Arkadiy Sakhartov

As for Uber raising its commission to offset higher costs, that could be problematic because it would come at the expense of the drivers, says Veeraraghavan. Drivers already bear the cost of fuel, car depreciation and insurance — and they could leave for a competitor if Uber takes more from them. Already, Uber has a problem with driver churn. Berman says half of its drivers become inactive after only 12 months.

Problems with drivers are likely what’s motivating Uber to invest in self-driving cars. However, that means Uber would have to own cars. “They’re replacing the labor cost with the capital cost,” Veeraraghavan says. “Is the capital cost cheaper? I’m not sure.” But Sakhartov sees autonomous vehicles as the most plausible fix to Uber’s financial model. “By undercutting prices and heavily investing in its technology, Uber may accept losses now because it counts on the future advantage of combining its business format with driverless vehicles,” he says. “Such vehicles are now predicted to dominate all other cars by year 2035. In that case, the cost structure of the taxi business will change substantially.” Without any driver costs, Uber would recoup its losses.

Despite its cash flow issues, Uber is by far the dominant global ride-hailing startup — and it is expected to stay that way. Hernandez believes that in many markets, there will be an oligopoly composed of Uber and perhaps one or two local startups — not more. “The barriers to entry [have risen.] You need a brand, you need cash,” especially since Uber, with its big war chest, is always in the background. Berman adds: “I don’t see the market having more than two or three ride-hailing apps that will be profitable in the long run, unless prices increase and go back to [being comparable with] taxi companies.”

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Uber's Stock Surge: Navigating All-Time-Highs Ahead Of Q4 Earnings

Zinger key points.

Uber's stock is trading at all-time-high levels ahead of the Q4 earnings.
Analysts will be focusing on key metrics like gross bookings and the performance of its mobility and delivery segments.

Uber Technologies Inc UBER will report its fourth-quarter earnings on Feb. 7 . Wall Street expects 15 cents in EPS and $9 billion in revenues as the company reports before market hours .

The company's stock is up over 105%% over the past year, about 13% in 2024 so far. The stock is currently making new all-time highs as it crossed $70 a share on Feb. 6. Investor optimism ahead of the company’s fourth quarter earnings report appears to be fueling the stock.

Here’s what analysts will be focusing on, and how the stock currently maps against Wall Street estimates.

Uber Investment Thesis

Uber Technologies emerged as a standout player in both the mobility and delivery sectors, exhibiting substantial growth in its mobility business with impressive booking and adjusted EBITDA expansion in recent years.

The company’s delivery business has become a significant contributor, constituting over 34% of total revenue and achieving positive adjusted EBITDA profits in FY22.

Uber’s financial performance is characterized by strong revenue growth, improved cash flow, and a resilient balance sheet. This signals a trajectory of sustained growth and margin expansion for the company.

Uber’s strategic emphasis on operational efficiencies and expense management has yielded positive outcomes, enhancing the take rate and operating margin.

A significant development is Uber’s clarification on the Department of Labor’s reclassification of workers, assuring investors that it will not have a material impact on the existing regulatory framework. Uber’s insight into driver sentiment, indicating dissatisfaction with the loss of independence and flexibility, underscores its commitment to maintaining a favorable relationship with its workforce. The management’s adept execution in navigating labor laws reinforces confidence that the impact of new regulations will be minimal on Uber’s financials.

Furthermore, Uber’s continued dominance in both mobility and delivery segments positions it for potential share price gains in 2024. The company’s proactive stance on cross-selling opportunities, surpassing competitors like Lyft Inc LYFT adds to its strength in the market.

With regulatory uncertainties easing, Uber is poised to accelerate growth in both the delivery and mobility sectors. The overall risk-reward profile for Uber appears increasingly favorable, making it an attractive investment opportunity as the company continues to strengthen its market position and capitalize on the evolving landscape of transportation and delivery services.

Also Read: Uber’s Upward Trajectory, Improved Margins and Ad Revenue To Continue – BofA Analyst Raises Forecast

Uber Analysts’ Focus & Consensus Ratings

Q4 Analysts’ Focus: Analysts will closely examine Uber’s earnings, focusing on key metrics like gross bookings, profitability trends, and the performance of its mobility and delivery segments.

Insights into future expectations, including growth targets, regulatory strategies, and the impact of economic conditions, will be crucial. Additionally, attention will be on user dynamics and technological innovations.

Ratings & Consensus Estimates: Consensus analyst ratings on Uber stock stand at a Buy currently with a price target of $60.75. Recent ratings received in January 2024 have pegged the stock's target price between $68 and $79 a share so far.

UBER Price Action: Uber stock was trading up by 2.03% at $70.39 at the time of publication Tuesday.

Read Next: Uber, Lyft Can Hitch A Ride Higher If Q4 Earnings Beat Wall Street Estimates

Photo: Courtesy Uber

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Uber Strategy Teardown: The Giant Looks To An Autonomous Future, Food Delivery, And Tighter Financial Discipline

September 14, 2017
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The $68B gorilla continues to expand globally in places like India and Brazil and is still chasing autonomous driving. However, it will have to stem its losses ahead of an eventual IPO, which may lead to rollbacks in contested regions like Southeast Asia.

Uber is known for many things, but one thing that has remained constant is its ability to steal the spotlight. Once the darling of tech media, one of Silicon Valley’s most lauded growth stories, and the progenitor of an entire category of on-demand startups , Uber’s tumultuous 2017 has seen the company’s fortunes shift almost overnight.

Scandal after scandal brought accusations of everything from misogyny to intellectual property theft. This has turned the executive ranks of the world’s most valuable private startup into a revolving door. An exodus of senior leadership was capped by an investor revolt against co-founder and CEO Travis Kalanick, who had been virtually synonymous with the company and its famously aggressive culture.

New chief executive and former Expedia CEO Dara Khosrowshahi is just weeks into his new role, but faces pivotal decisions on how best to repair the company’s battered image and right the ship strategically. With a stated target of taking Uber public within the next 18-36 months, Khosrowshahi must strike a balance between financial discipline while also maintaining the growth and opportunity narrative that seduced investors and helped give Uber its lofty valuation.

Uber Strategy Teardown

Download the full PDF and break down the world’s most valuable startup as it navigates legal, reputational, and leadership uncertainties.

Under new management, Uber’s strategies in both international markets and key fields of research like autonomous vehicles are open to revision. Key takeaways from our analysis focus on the company’s major initiatives:

Balancing “paying the bills” and “big shots”: Uber’s new CEO committed to both instilling financial discipline ahead of a potential IPO and remaining invested in major forward-looking initiatives (such as autonomous vehicles). Aside from the considerable task of repairing the company’s damaged image and culture, finding a balance between these goals will be his major challenge going forward.
Uber rethinks global strategy: Uber’s growth ambitions have begun shifting away from the pugnacious, attack-on-all-fronts strategy and indiscriminate spending of its earlier years, although the company’s latest financials continue to show a growing top-line as well as considerable cash burn. Our jobs listing analysis reveals that the company is still actively hiring in India, Brazil and Mexico. However, with a stated vision of taking Uber public within the next 18-36 months, Khosrowshahi may look to further narrow the focus on Uber’s efforts abroad to rein in money-losing efforts. Southeast Asia is one hotly-contested region where the company is spending heavily against the well-financed Grab and Go-Jek.
Recent dealmaking focuses on divesting costly regional operations: Uber has withdrawn from its China and now Eastern European operations, retaining a significant stake in both while ceasing involvement in day-to-day operations. The company has now established a template that it can return to should it decide to draw down losses in other geographies.
M&A to date has emphasized mapping and AI/AVs (autonomous vehicles): A late entrant into the now-fierce race to develop AVs, Uber has turned to M&A to bridge the gap in related competencies such as mapping and artificial intelligence. Its highest-profile deal to date was its acquisition of self-driving truck startup Otto, headed by Google Self-Driving Car (now Waymo) veteran Anthony Levandowski. That acquisition has led the company into a potentially devastating lawsuit with Waymo.
AI, AVs remain a priority: Despite the upheaval in the wake of Waymo’s lawsuit, Uber is still hiring actively for its autonomous vehicle development group (Advanced Technologies Group or ATG). The unit comprises 6% of Uber’s total job listings, with the company seeking talent in the white-hot field of autonomous vehicle engineering. Uber also added a prominent AI researcher to lead a new ATG self-driving team. However, the unit’s long-term future is in doubt, with the Waymo lawsuit a looming threat and ATG requiring a sizable and sustained financial investment.
Uber scales back other side ventures, focusing on food delivery: Outside of its core ride-hailing business, the company has retrenched in its once-hyped UberRUSH courier service effort, focusing on meal delivery platform UberEATS instead. The company continues to push UberEATS into new markets. Uber is also pursuing significant talent to support its food delivery service; 14% of the company’s open job listings mention UberEATS in the title. Uber has also recently launched its Freight service targeting the trucking brokerage market, but the new initiative has yet to gain meaningful traction.

Job listing analysis
Financials & valuation
Divestitures
Competitive landscape and a word on SoftBank
Patent data analysis
AI and autonomy
Courier and food delivery services
Other initiatives: Freight brokerage and flying cars
Final words

BACKGROUND ON UBER and its new ceo

Though a surprise pick for the position, industry observers have generally praised Dara Khosrowshahi’s appointment, variously noting his experience helming a travel aggregator as well as overseeing a turnaround as Expedia’s chief executive. Expedia was losing share to competitors like Priceline when Khosrowshahi assumed the helm in 2005. The company was criticized for passing on an early chance to acquire Booking.com, which was acquired by rival Priceline and went on to become the world’s largest hotel booking site.

However, Khosrowshahi was willing to commit to long-term fixes, including migrating Expedia’s disparate brands to a common tech platform and recognizing the need for Expedia’s business model to evolve (from its preferred “merchant model” where it bought blocks of hotel rooms, to a hybrid model with the newer, lower-margin “agency model” pioneered by Booking.com in which platforms act more as intermediaries). Not coincidentally, this is more like Uber’s marketplace model.

These efforts have undergirded Expedia’s recent uptick in acquisition activity, visualized below with our Acquirer Analytics tool. The company has made at least one purchase annually since 2015, and made three major acquisitions in 2015 alone:

(Clients can click here to browse Expedia’s rise in acquisition and investment activity.)

Khosrowshahi’s efforts resulted in the company more than quadrupling its gross travel booking value and doubling its pre-tax earnings under his leadership. Uber’s stakeholders are no doubt hoping that Dara-the-dealmaker will be able to lead another successful turnaround. He will likely have the missed Booking.com in mind as he weighs risk against reward for Uber’s future opportunities.

It’s worth mentioning that Uber also passed on a chance to merge with or acquire a major competitor: domestic rival Lyft offered to merge with Uber in 2014 for a share in the combined company, but talks broke down after Kalanick refused to budge on the share offered to Lyft (as Brad Stone writes in The Upstarts). Uber was again named as one of the potential buyers that Lyft had sought for itself in 2016, to no avail, according to the New York Times.

Though Uber still dwarfs Lyft by a considerable margin, the latter’s increasing US market share and partnerships in the autonomous vehicle space represent a growing thorn in Uber’s side. If Uber were able to strike a deal with its competitor under its new CEO, it would able to draw down its domestic US spending in a major way to focus on international efforts and frontier initiatives like autonomous vehicles.

Although this teardown will primarily focus on data points around Uber’s business strategy, it goes without saying that Uber and its new CEO face cultural and legal issues almost too numerous to list that have negatively affected the company’s prospects and investor confidence. Moreover, its guiding principle to date has been Kalanick’s mantra of “growth above all else,” which has defined the company to date not just culturally but also strategically (and so will resurface throughout our analysis).

The company’s alpha-male, growth-at-any-cost mentality and willingness to skirt regulatory and ethical boundaries arguably enabled it to crack open stagnant taxi and transport markets in the first place, attracting unprecedented amounts of capital in the process. In the same vein, a good deal of Uber’s self-made crises can also be traced to the institutionalization of these traits. This double-edged sword mirrors Kalanick mentor Mark Cuban’s description of the former CEO, saying in a New York Times interview:

“Travis’ biggest strength is that he will run through a wall to accomplish his goals. Travis’ biggest weakness is that he will run through a wall to accomplish his goals.”

Taken to their extreme, these philosophies have manifested themselves in the company’s Greyball tool for deceiving law enforcement, disregard for California DMV regulations for autonomous vehicle testing, and near-eviction from Apple’s App Store, among many other scandals. Allegations of pervasive sexual harassment and discrimination have also come to light, most notably from former engineer Susan Fowler.

It is worth noting that many of these issues are not wholly new: Uber’s abuse of its “God View” tool was first reported on 2014, as were sexist remarks from Kalanick and general knowledge of the company’s less-than-scrupulous business practices and sometimes insensitive treatment of drivers. However, for years these issues failed to slow Uber’s growth and fundraising momentum, as investors eagerly piled into technology’s hottest company. For longtime Uber watchers, 2017 was the year these issues came to a head with material impacts on the company’s business and investor outlook.

Active lawsuits and investigations involving the company include Waymo’s suit for intellectual property theft (which will go to trial), early investor Benchmark’s suit to remove Kalanick and three related seats from Uber’s board (which has been sent to arbitration), and a DOJ foreign bribery law probe, just to name a few.

Finally, Uber has also toed the line with the cutthroat competitive tactics it has employed against its rivals. These include Uber’s SLOG program for undermining competitors and its “Hell” program exploiting a Lyft vulnerability to track its opponent’s drivers. While these tactics are ruthless and have often been grouped together with the company’s other unscrupulous practices, their legality is undetermined. The FBI has begun investigating the software, although a lawsuit over the “Hell” program was recently dismissed in California federal court.

Khosrowshahi now faces the significant challenge of reforming Uber’s culture; former Attorney General Eric Holder’s investigation into the company resulted in a lengthy list of recommendations. Aside from extricating Uber from these many scandals, the company’s new chief executive must tackle a range of serious business challenges. One fundamental issue is replenishing the depleted ranks of Uber’s senior leadership:

Chief among these is Uber’s vacant CFO position, which has become a sore subject with some increasingly uneasy investors (Benchmark singled out the issue in its lawsuit against Travis Kalanick). The company has technically been without a CFO for over two years, a nominal head of finance Gautam Gupta departed for Opendoor in May. A CFO would play a critical role in preparing for an eventual IPO, which Travis Kalanick famously thumbed his nose at the thought of pushing forward:

“I say we are going to IPO as late as humanly possible. It’ll be one day before my employees and significant others come to my office with pitchforks and torches. We will IPO the day before that.”

By contrast, by his first all-hands meeting at Uber’s helm, Khosrowshahi had already floated the potential goal of taking Uber public within the next 18 – 36 months. The company has begun more regular, though still selective, financial disclosures over the past year. According to Axios, its latest Q2 2017 figures show continued top-line growth, with gross bookings up to $8.7B and adjusted net revenue hitting $1.75B (both roughly doubling year-over-year).

These figures do encompass the period of a large number of Uber’s scandals from earlier this year and the #DeleteUber campaign, but do not cover Kalanick’s departure and board civil war in Q3 2017. Uber’s adjusted losses, though narrowing, are still considerable and also exclude stock compensation, which the company is known for paying out generously in lieu of high cash salaries. Uber burned roughly $600M in cash through the quarter, with its total cash holdings down to $6.6B from $7.2B at the end of Q1 2017.

Coming back to Uber’s growth-obsessed mantra, the numbers reflect that the company has done well by this criteria, with its central ride-hailing business continuing to expand. The company’s booming top-line speaks to the still-considerable strengths of the company and opportunity ahead of it.

Though its product has evolved over time, from a tactical standpoint Uber has largely stuck to the same aggressive playbook: flooding new markets with incentives to recruit a critical mass of drivers and using subsidized fares to lure in riders. (Critics have labeled this as venture-financed predatory pricing, with the company often steamrolling regulators and misleading drivers in the process.)

Tracing this back to Uber’s overall strategy, last September Ben Thompson of Stratechery voiced concerns over Uber’s strategic finesse should the company meet an obstacle too stubborn to be overcome by the brilliance of its product-market fit and executional prowess:

“I do worry about this potentially fatal flaw: when and if Uber encounters a problem that requires more than simply hustle and execution, does their executive team have the temperament, strategic mindset, and deep-rooted understanding of their customer base to make decisions that aren’t so easily swept under the rug of product-market fit?”

With thorny questions surrounding Uber’s scandals, in addition to its plans for profitability, autonomous vehicles, international expansion, and beyond, perhaps it’s true that the company can no longer afford to simply be operationally brilliant yet strategically lacking. Khosrowshahi has acknowledged Uber’s multiple priorities, one being instilling financial discipline to “pay the bills” and the other being to “take big shots” and build for the future.

While it is too early in Khosrowshahi’s tenure for meaningful strategic changes to have taken hold, the company has already pruned its worst loss-making ventures and refocused its business both geographically and organizationally. We’ll explore those moves and other potential targets for Khosrowshahi in the sections ahead.

JOB LISTING ANALYSIS

For a view into Uber’s organizational priorities and growth areas (both geographically and vertically), we analyzed the company’s open job listings as of 8/29/2017. Note that these listings are for Uber corporate, and exclude listings or openings for the hundreds of thousands of driver positions available at the company worldwide.

The following graphic shows the distribution of Uber’s over 1,900 open job listings by team and subteam, where available. Click on the image to enlarge.

As mentioned above, Uber’s traditional strategy has historically emphasized growing and optimizing the supply side of their two-sided marketplace (that is, its network of drivers). The company’s billions in losses stem in large part from its spend to recruit and retain its drivers, a basic formula Uber has stuck to in both established markets like the US and areas of opportunity it has targeted internationally.

It’s not surprising, then, that the boots-on-the-ground work of launching, scaling, and maintaining operations in markets across the globe between the Operations & Launch and Global Community Operations teams accounts for over a third of Uber’s active job listings at 38.3%. These teams are on the front lines of Uber’s interactions with its “driver-partners” (in company parlance) and riders.

Engineering and product

On the general engineering and product side, Engineering (14.7%), Product (4.4%), and Design (3.1%) collectively account for roughly a fifth of the company’s openings. Peeking into Engineering subteams reveals a push on data science and mapping talent, both of which have been points of emphasis for the company.

Uber’s Advanced Technologies Group (ATG) is the Uber unit attracting the most media attention (and legal scrutiny), primarily for its work on self-driving vehicles spanning both passenger cars and trucks. The company’s recruiting efforts for ATG are apparent, with nearly 6% of its open listings filed under the unit (or just over 100 jobs). We’ll be diving into detail on ATG later on, but Uber’s job listings show ongoing recruiting efforts for deep learning and autonomous vehicle experts, among the most in-demand engineering roles in contemporary tech. Despite the legal specter hanging over the group, Uber is still investing in its autonomous vehicle efforts for the moment.

Looking at the geographic spread of Uber’s roles, generally, over half of the company’s open positions are based in North America. Asia represents just under a quarter of its listings, followed by Europe and South America.

Diving into specific countries, the US accounts for the lion’s share of roles as expected, with 48.6% of Uber’s open listings in its home country. We also analyzed the top ten ex-US countries where Uber is seeking talent:

Notable for their absence are markets such as China and Russia, evidence of Uber’s retrenchments abroad. The company’s August 2016 sale of its China unit to Didi Chuxing marked a sudden reversal in what had been a stubborn win-at-any-cost philosophy that cost Uber and its competitors billions (more on those deals in a moment).

Instead, Uber’s new international strategy now involves a more targeted approach, with a particular focus on developing markets. Uber and its rivals sense an opportunity to “leapfrog” the traditional vehicle sales model as consumers in these markets grow wealthier, pushing their ride-hailing and fleet-based services where ingrained cultures of individual car ownership have not been established. With ambitions in logistics services and transportation beyond just ride-hailing, these players are also referred to as transportation network companies (TNCs).

These international growth priorities are evident in the graphic, with India ranking as the non-US country with the most open job listings at nearly 8% of the total (or 150 jobs). Uber is also aggressively seeking talent in Southeast Asia, with Singapore, Indonesia, and the Philippines all making the top 10. Outside of Asia, Uber is also recruiting heavily in Latin America, with Brazil and Mexico collectively representing over 10% of the company’s open positions.

Uber’s SVP of Global Business highlighted India, Brazil, and Mexico as Uber’s top priorities; indeed, these three countries rank as Uber’s top 3 ex-US destinations in our jobs listing analysis. (We’ll cover that later on, with a deep dive on the stiff competition Uber faces from well-financed, home-grown rivals across these regions, including Grab in Southeast Asia, Ola in India, and 99 in Brazil, and more.)

Meanwhile, hiring in Uber’s traditional overseas headquarters of Amsterdam remains significant, representing 4.4% of its total. However, Uber’s European job listings in aggregate represented just under a tenth of its total, with the company listing more openings in emerging Asian markets and its home North American market.

Also not highlighted here is the Middle East and North Africa, another growth market where another ride-hailing competitor (Careem) has raised over a half-billion in capital. Egypt ranks just behind Japan for 11th place among Uber’s top ex-US hiring destinations, with 1.1% of the company’s open job listings.

FINANCING & VALUATION HISTORY

Uber has reached a level of mainstream consciousness uncommon among private startups, not just for the ubiquity of its service but also the vast sums of capital it has raised at eye-popping valuations. Our funding and valuation data reflects Uber’s meteoric rise since its March 2009 founding as UberCab (note that funding raised specifically for Uber’s China operations is broken out separately here):

(CB Insights clients can click here to access Uber’s profile and directly view all of its financing, investor, and valuation data.)

Growth was especially dramatic in the early- to mid-decade, culminating in Uber raising upwards of $6B in capital in 2016 alone. With Uber’s cap table crowded with dozens of investors and employees tied to famously restrictive “golden handcuffs” until recently, Uber has looked beyond standard equity financing to avoid further dilution for its shareholders. One of the company’s last major financings was a $1.15B leveraged loan in July 2016, arranged by four banks including Morgan Stanley and Goldman Sachs. Uber is said to be paying a yield of roughly 5% on the loan, according to the Wall Street Journal.

Uber has tapped countless sources of capital to amass its war chest, and thus sports one of the most diverse investor networks of any private venture-backed company. We used our business social graph to highlight four key groups of Uber backers:

The company is famous for its clutch of early angel and VC investors, which the company has likewise lifted to stardom; Uber’s meteoric rise in valuation could single-handedly return the fund for these VCs, and generate a fortune for early angels. Crucially though, many of these returns are still on paper, with most investors not seeing any liquidity beyond secondary market transactions. Investors have been rattled by their inability to lock in returns, combined with the uncertainty now surrounding the company. This friction has contributed to ugly confrontations like Benchmark’s ongoing lawsuit against Kalanick (as disclosed by the firm’s complaint, Benchmark holds a roughly 13% equity stake, with Kalanick currently holding around 10%).

Veteran VC and longtime Uber champion Bill Gurley departed the company’s board in late June, after leading the push to pressure Travis Kalanick into his resignation. His board seat was filled by Matt Cohler, another general partner at Benchmark, but the firm remains in an uncomfortable position that has drawn ire from both other Uber investors and the venture industry as a whole. Shervin Pishevar, another early Uber backer, is now leading a coalition of investors pressing Benchmark to sell its Uber shares and leave the company’s board.

However, this controversy does highlight a growing concern within the investor community, as startups (particularly highly-valued unicorns ) continue to stay private longer with multi-billion-dollar late-stage financings and access to diverse sources of capital, while early backers see limited liquidity despite enormous paper gains. In some ways, Uber has been the banner-carrier for this movement, with the company raising billions from investors like mutual funds and the Saudi sovereign wealth fund that aren’t typical private market investors, enabling Kalanick to avoid taking the company public.

Indeed, legendary VC Fred Wilson of Union Square Ventures sided with Bill Gurley on founders’ and management teams’ fiduciary responsibilities:

“I agree with Bill Gurley on this. [Uber] should be a publicly traded company. When you take money from me, am I getting money from you? You have a responsibility to give me my money back sometime. You can’t just say f— you. Take the g—— company public.”

Another notable investor is GV (formerly known as Google Ventures), which first invested in Uber’s 2013 Series C alongside TPG. Longtime Alphabet exec David Drummond joined Uber’s board as part of the investment, but departed the position in late 2016 over a conflict of interest. Drummond had been “shut out” of meetings as Uber’s autonomous vehicles ramp-up brought intensifying competition with the Google Self-Driving Car project (now Alphabet company Waymo).

Since gorging itself on new capital in 2016, developments on the fundraising front have been quiet since the company’s Uber China divestment last August. Although the company still holds more than $6B in cash, there are signs that Uber’s business challenges and endless scandals have weighed on investor confidence in 2017. Uber’s mutual fund backers, which regularly disclose their private company valuations, have become the most outwardly visible indicator of this, as some recently marked down their Uber positions by up to 15%.

Potential new investors on the horizon include previously-mentioned SoftBank (which has already secured stakes in nearly all of Uber’s major rivals as well) and Dragoneer Investment Group, which are both said to be weighing a flat round, according to Bloomberg, that would bring Uber up to $1.5B in new capital, while also buying out up to $10B from the company’s existing shareholders. This deal would shake up the status quo considerably, as discussed in our analysis of SoftBank further below.

Despite not raising any significant disclosed funding in over a year, Uber still sits atop our unicorn tracker as the most valuable private VC-backed startup in the world:

Chinese counterpart Didi Chuxing ranks among the few unicorns with a comparable valuation, last pegged at $50B as of Didi’s mammoth $5.5B raise in April 2017. For its part, Uber’s most recent $68B valuation dates to over a year ago, when Didi Chuxing itself invested $1B in Uber as part of the Uber China exchange (more on Uber’s divestitures below).

Though our analysis of liquidation terms has found a recent resurgence in investor-friendly senior liquidation preferences, our enhanced deal terms and valuation data shows relatively vanilla deal terms on this round, with a 0-1x liquidation multiple and pari passu preference. However, given the leverage that Uber has historically commanded over investors, it’s not surprising that Uber has been able to raise on largely favorable terms.

Clients can see more on divestitures below .

DEALS: ACQUISITIONS & INVESTMENTS

In September 2014, then-CEO Travis Kalanick boasted about Uber’s commitment to non-acquisitive growth:

“Uber has not acquired a single company. We are focused on the product. We are in 45 countries. We haven’t spent time on M&A.”

That era of Uber’s history is over. Uber recently completed its tenth major transaction as an investor with the acqui-hire of the team behind social app studio Swipe Labs, a deal that came less than a week after news of Uber’s deal with competitor Yandex Taxi, in which Uber ceded its Russian operations to Yandex in exchange for a 36.6% stake in a new joint company (created from their merged assets in the Russia market).

Uber started acquiring and investing in startups in Q1’15, and nearly every deal has had notable consequences for the business, including:

Patent acquisitions (and lawsuits)
Market share concession
Business-unit creation and management shifts

We used our data to take a closer look at the company’s M&A history to analyze how Uber has behaved as a strategic investor.

Mapping has been a key focus, with Uber acquiring deCarta back in Q1 2015. The deal bolstered Uber’s mapping and navigation functionality, but it also kept deCarta’s patents out of the hands of Google, Apple, and other tech giants with aspirations in autonomous vehicles (AVs).

Uber followed up the deCarta acquisition by purchasing Microsoft’s Mapping Unit in Q2’15. The deal brought 100 of Microsoft’s engineers (as well as its data center and licensed intellectual property) in-house to Uber. As a result of the deal, Microsoft confirmed it no longer collects its own mapping data. In July 2016 Uber was said to be investing a further $500M to enhance its mapping system. Uber’s mapping vehicles have ranged as far as Singapore.

Uber has also taken a minority stake in an Indian company, plugging $6.4M into Xchange Leasing India in Q3’15, likely with an eye for boosting driver participation in India: partnering with Xchange gave Uber a way to offer affordable leases to drivers. Olacabs , Uber’s top competitor in India, announced a similar deal with an Indian automaker weeks before Uber acknowledged the investment in Xchange. Uber made a $30.2M follow-on investment in Xchange in Q3’16, but continues to battle Ola for market share in India. (For more on these top global ride-hailing firms’ investment and M&A strategies, click here .)

All of Uber’s systems- and talent-related acquisitions have sparked controversy. The company’s Q3 2016 acquisition of Otto—a self-driving truck startup founded by former Google engineer Anthony Levandowski—for $680M led Alphabet subsidiary Waymo to file a lawsuit in Q1 2017, accusing Uber of “calculated theft” of its AV trade secrets and technology.

Prior to the Waymo suit, in Q4 2016 Uber acquired Geometric Intelligence and the company’s 15 employees to form Uber AI Labs, a new artificial intelligence unit; the startup was working on making AI systems work with smaller sets of data than are typically required for object or scene recognition. Uber AI Labs saw a leadership change just three months after the acquisition: Gary Marcus, the former CEO/co-founder of Geometric Intelligence, stepped down from his role as head of Uber AI labs in March amid heightening criticism of Uber’s management practices, business tactics, and workplace culture.

Uber’s Q2 2017 acquisition of Swipe Labs —which built photo-sharing, chat, and video apps over its four-year history—was the company’s first acquisition since Travis Kalanick left the CEO role. Since the deal brings experienced engineering talent into Uber at a time when recruiting is almost certainly a challenge, we’ll be watching whether it’s the first of many acquisitions.

DIVESTITURES

Several of Uber’s moves have also narrowed the scope of its international operations outside North America. Since launching its China operations in 2014, Uber had been locked in a fierce price and subsidy war against Didi Dache and Kuaidi Dache (the two later merged into Didi Chuxing, fka Didi Kuadi, to better combat Uber).

After burning over $2B in cash in two years of Chinese operations, Uber moved to sell its Uber China operations to Didi Chuxing in Q3’16. The terms allowed Uber to retain a 17.7% stake in the merged entity (with a 5.98% voting stake) in exchange for a $1B investment in Uber from Didi, with Uber becoming the largest single shareholder in its former rival.

Media reports characterized the deal as Uber’s “retreat” from China, and the divestment did mark a notable departure from the company’s commitment to winning wars of attrition. However, Uber was able to distance itself from the cash furnace that was its Chinese operation while retaining a sizable stake in any profits from the lucrative Chinese market. With Didi now valued at $50B as of its latest mega-round financing, Uber’s 17.7% share in the company is nominally worth over $8B.

In its most recent transaction, Uber also struck a deal with Yandex in Russia: with dynamics similar to the Didi Chuxing deal, Uber will invest $225M for a 36.6% stake in a new company created from Uber’s and Yandex’s assets in the Russia market. Yandex will invest $100M and own a 59.3% stake in the combined entity, with the remaining 4.1% held by employees. Once again, the company seemed to be looking towards narrowing its losses and geographic focus, while still retaining a stake in emerging markets (although it should be noted that the scale of the Didi and Yandex opportunities is vastly different).

COMPETITIVE LANDSCAPE and a word on SoftBank

As recently as two years ago, it seemed that Uber was poised to dominate ride-hailing markets across the globe, flush with cash and riding the peak of the unicorn craze. The company stayed true to Kalanick’s aggressive growth philosophies, venturing into countries from China to Brazil.

Uber’s battles with home-grown rivals in India (Ola) and Southeast Asia (Grab and Go-Jek) have been well-publicized, with its competitors also drawing multiple billions in funding. The threat to Uber’s traditional strategy of fighting wars of attrition in new markets has grown in tandem with these companies’ war chests. As seen in the jobs listing analysis above, these regions also rank among Uber’s most active in terms of open job listings.

Of these Southeast Asian competitors, Grab has raised progressively larger rounds, capped by a $2B Series G in July from Didi, SoftBank, and Toyota (as part of an ongoing $2.5B raise). Among Uber’s competitors, Grab in particular has invested aggressively in new markets, recently allocating $100M over the course of three years to shut Uber out of the recently liberalized (and rapidly digitizing) Myanmar.

By contrast, Ola has comparatively stumbled. After raising a $275M Series G in November 2015, the company did not see new capital until it received $330M from SoftBank in February 2017. The financing was a significant downround, in which Ola’s valuation was slashed from $5B to $3.5B amid competitive pressure in Uber and the broader slowing of venture investment in India.

Given Ola’s struggles, Southeast Asia is beginning to look like a more uphill battle than India. Grab has strengthened its competitive position in Southeast Asia, while another major competitor in Indonesia, Go-Jek (whose ride-hailing service was originally founded on ojek motorcycle taxis), is ramping up.

When speaking to Indian reporters in August 2017, Uber SVP of Global Business David Ritcher also made no mention of Southeast Asia, instead naming the exact top three countries highlighted in our job listing analysis above :

“There are three countries that we are betting on – India, Mexico, and Brazil. We have seen phenomenal growth in India, in July this year over last, we have seen 115 per cent growth.”

To be sure, Uber is still in a firm second place behind its Indian rival Ola, but scaling back in Southeast Asia or any of its myriad areas of operation would allow the company to concentrate its resources against a narrower pool of competitors.

SoftBank and Didi Chuxing have both become ubiquitous names on the cap tables of ride-hailing companies. Using the CB Insights Business Social Graph, we can visualize SoftBank and Didi’s various plays in the international ride-hailing market (each green line represents one deal):

SoftBank has participated in multiple financings to Uber’s three largest Asian counterparts, including Didi Chuxing itself. The conglomerate has also backed Uber’s chief Brazilian rival 99 (formerly 99Taxis). This is another emerging market that has become hotly contested, and Uber seems to be committing to the Latin American opportunity (recall that Brazil and Mexico, respectively, ranked as the second-place and third-place countries by share of open Uber jobs in our analysis above).

As mentioned above, SoftBank is now said to be strongly considering an Uber deal, with Recode reporting that talks have advanced under Uber’s new CEO. The potential arrangement is said to include both the sale of new shares (which would raise fresh capital for Uber) and the buyout of shares from existing investors, in a deal that could range up to $10B total. Earlier in August, the conglomerate had signaled interest in either an Uber or Lyft stake.

Whether SoftBank strikes an Uber deal or not, the firm looks to be making a blanket bet on the ride-hailing space as a whole. The generous sums of capital doled out by the firm could further extend these private companies’ runways and further distort the traditional private markets funding environment (investors are wary that the company and its $100B Vision Fund might do the same in other tech sectors).

However, a potential deal is said to include a sizeable secondary market transaction, which could give some employees and early investors an opportunity to see liquidity. An infusion of new capital, combined with liquidity for early stakeholders, could reduce the need for Uber to go public and change its strategic standing yet again.

Didi has mutual stakes with SoftBank in all of the latter’s ride-hailing investments, in addition to its own investments in Lyft and Middle Eastern counterpart Careem Networks. The Chinese firm’s investment- and partnership-based approach to empire-building is a stark contrast to Uber’s strategy of direct invasions and competition. Prior to the Uber China-Didi deal, Didi had also led the formation of an “anti-Uber” alliance spanning its regional investment partners, although that coalition has fizzled since the Uber China detente.

In Europe, Uber has established a significant presence, but has also been shut out from markets like Denmark, Germany, and Hungary by regulations. The Daimler-backed myTaxi service claims to be operating at a larger scale than Uber in Europe, while Daimler also recently invested in Via to bring that shuttle-based service’s operations to London. Gett and Taxify are also notable competitors.

Given the patchwork state of European regulations and competitors, combined with the lack of a large primary opportunity and more mature market, it’s not surprising that Uber’s heaviest international efforts have focused on developing markets.

Finally, in the US, Uber’s dominant position has eroded as Lyft has battled back with generous subsidies combined with concerted marketing and partnership efforts. Lyft has also taken advantage of Uber’s tumultuous 2017, especially in the wake of the #DeleteUber campaign in the spring.

Second Measure’s data on Uber’s US market share showed that figure falling from over 90% in 2014 to 74% as of August 2017, with a near 5% drop in the week of #DeleteUber alone. The company’s loss of share has come almost entirely at the hands of Lyft.

PATENT DATA ANALYSIS

Uber’s patent activity is predictably more sparse than that of giants like Google or Amazon . Nevertheless, the ride-hailing giant is growing more active in securing its intellectual property, particularly as it ramps up research efforts in frontier technologies such as autonomous driving.

Note: This analysis comes with a few caveats, primarily that the patent filing process involves a significant time lag before the publishing of patent applications. This delay can range from several months to over two years . We also focused on Uber proper for the purposes of this analysis, which would exclude any patents absorbed through external acquisitions not reassigned to Uber itself.

We also mined each year’s applications to tease out recurring keywords from the patent abstracts, using a significance weighting scheme to surface words and phrases. (Note that records prior to 2014 are likely complete, but analysis for the most recent years only includes applications published to date, subject to the USPTO review and publication process.)

While patents are still being released weekly, the ones that have rolled in from 2015 and 2016 highlight Uber’s intensifying focus on autonomous vehicles research following the formalization of its self-driving unit, seen in orange below. The company’s significant patent phrases highlight a shift away from building its core on-demand network (“demand service” and “transport service”) to autonomy and related efforts in mapping (highlighted in blue):

Clients can click here to search Uber’s autonomy vehicle patent activity; we’ve also highlighted specific Uber patents in our tracker of auto and logistics tech patents activity .

While this analysis concentrates on patents assigned to Uber proper, it goes without saying that the company’s acquisitions have brought Uber both additional intellectual property and serious allegations of IP theft. Waymo’s suit against the company alleged, among other things, that Otto co-founder Anthony Levandowski stole 14,000 confidential documents before leaving Google, enabling Uber to infringe on its technology patents —particularly that of Waymo’s proprietary lidar technology.

Levandowski has since stepped down from his role as head of Uber’s self-driving unit, but the suit remains pending. Otto’s acquisition of Tyto Lidar in Q2’16, in advance of Uber’s purchase of Otto, will likely play a role in the case. Court documents have revealed Waymo’s allegations that Levandowski personally owned and controlled Tyto during his tenure at Google; the company’s path to Uber is obscured by a number of shell companies.

Regarding Uber’s deCarta deal, reports show that the company transferred 7 patents to Google (related to matching mobile users and service providers, mobile advertising, and connecting mobile users based on degree of separation) and sold 6 to Samsung (related to mobile user notifications) prior to being acquired by Uber. At the time of Uber’s acquisition, deCarta owned 25 patents, plus 6 pending, covering various aspects of route planning, point-of-interest identification, and internet-based map searching.

UBER INITIATIVES BY SECTOR

Ai and autonomy (advanced technologies group).

Uber’s Advanced Technologies Group is the company’s central hub for developing autonomous vehicle (AV), mapping, and safety technologies. Under Travis Kalanick, the unit ranks among the company’s foremost long-term priorities. Although Uber itself has long threatened the model of traditional auto OEMs, Kalanick echoed automotive executives in labeling AVs an existential threat to his business, in an interview with Business Insider:

“It starts with understanding that the world is going to go self-driving and autonomous… So if that’s happening, what would happen if we weren’t a part of that future? If we weren’t part of the autonomy thing? Then the future passes us by, basically, in a very expeditious and efficient way.”

This sense of urgency to build in-house AV competencies fueled aggressive moves that have landed ATG into several controversies. Chief among these is the aforementioned Otto acquisition and subsequent Waymo lawsuit. The case has become a potentially existential threat to Uber’s self-driving program (and even the company at large) should the process end with an unfavorable ruling, the worst-case scenario being a decision that Uber’s Otto acquisition was an orchestrated play for intellectual property theft.

The trial is a month out at the timing of writing, but Alphabet is not known for being particularly litigious – executives like Larry Page and Sergey Brin have long been philosophically opposed to excessive patenting and IP litigation for stifling the innovative spirit of Silicon Valley. Thus, eyebrows were raised when Waymo disclosed its suit in February 2017.

The original founding of ATG itself caused some ill will as well, with Uber essentially abandoning a partnership with Carnegie Mellon in favor of poaching many of its staff directly onto its team instead (the company’s original Advanced Technologies Center is located in Pittsburgh for this reason).

Despite the turmoil surrounding the team and company, Uber remains committed to its AV development for the moment, and is still actively listing open roles within ATG:

It’s notable that recruitment areas here span some of the most in-demand fields in tech, including deep learning, sensor fusion, and computer vision specialists (mostly within the Software Engineering subteam above). With AV engineers in short supply and a fierce recruiting battle raging, salaries in the field now range up into quarter- or half-million-dollar territory , and Uber’s worsening image had made finding scare talent even more difficult. The company also lists a handful of additional positions to expand its Testing & Road Operations subteam, which is now active in Pittsburgh, Phoenix, and San Francisco (the latter after initially flaunting California DMV regulations, only to draw a sharp rebuke).

Aside from passenger vehicles, Uber teased the new look of its autonomous trucking prototypes in July 2017, perhaps as a reminder that its trucking program remains active in the wake of Waymo’s suit. Notably however, the lidar sensors fitted to Uber’s rigs was an off-the-shelf design, rather than any of the in-house solutions that have been implicated in the Waymo suit. The ongoing process has revealed that Uber continues work on its own proprietary lidar solutions, including an upcoming unit that it claims is “vastly different” from Waymo’s.

The company has also committed to new executive hires to replace autonomous vehicle talent lost in the wake of Waymo’s lawsuit. In May 2017, the company hired Raquel Urtasun, a noted University of Toronto AI researcher, to build out a lab for AV research in Toronto. The unit will be the third ATG office, joining Pittsburgh and the Bay Area (Geometric Intelligence continues to serve as the company’s central AI lab).

Reports on Uber’s AV progress to date have been spotty, but internal documents leaked to Recode in March 2017 painted a less-than-ideal picture, with the company’s vehicles disengaging (with human drivers being forced to intervene) nearly once every mile. By comparison, Waymo’s disengagement rates had fallen to 0.2 incidents per 1,000 miles in 2016. Although these companies may be recording these statistics differently, the relative gap is still considerable.

Despite its reputation as a maverick, Uber had originally looked to collaborate with high-profile AV developers , including both Google/Waymo Tesla. The Waymo-Uber lawsuit has revealed documents that detail Kalanick’s attempts to forge a partnership with Google. Kalanick eventually met with Google’s CEO Larry Page, but talks fizzled out and the companies quickly became bitter rivals. The former Uber CEO also met Tesla chief executive Elon Musk to propose an AV partnership but was rebuffed on that front as well.

Demanding a heavy capital outlay over a long timeframe and faced with an uncertain legal future, ATG stands as one possible candidate for the company to reduce its cash burn. Outward-facing indicators (like Uber’s disengagement statistics and smaller test fleet) pegs the company’s efforts behind competitors; new management may choose to jettison the sunk cost if the program is deemed too far behind. It remains to be seen whether Khosrowshahi will come to see an in-house AV development team as an “existential” necessity in the same way Kalanick did, although the new CEO did commit to “taking big shots” (in addition to “paying the bills”).

As recently as last month, The Information reported that an unnamed automaker had approached Uber to buy its self-driving unit outright, which the company rejected at the time. Nevertheless, Uber is now said to be reconsidering the notion of entering joint ventures or partnerships to defray the costs of developing AVs. The list of candidates has narrowed, with Uber’s list of acrimonious relationships, and Lyft actively seeking AV partners with its open autonomy platform (and also kicking off its own AV development efforts).

However, the company did strike a January 2017 agreement with Daimler to deploy the automaker’s self-driving vehicles on Uber’s ride-hailing network. Other automakers with fewer ride-hailing investments and partnerships might also be candidates, with Ford being one example. Should Uber ultimately scale back its AV program, many startups and larger corporations are developing on autonomous systems for retrofitting onto existing vehicles or licensing for third-party use.

COURIER AND FOOD DELIVERY SERVICES (UBERRUSH AND UBEREATS)

Uber Everything, the company’s startup-within-a-startup, resembles units like Alphabet’s X for incubating experimental ideas. Uber Everything is more focused than Alphabet’s “moonshot lab,” with an emphasis on building on-demand services adjacent to Uber’s core ride-hailing business. As one employee put it, Uber Everything would be like the countless “Uber for X” startups inspired by the company, except incubated within Uber.

The unit incubated two new products that have since taken divergent paths: UberRUSH, its on-demand local delivery service, and UberEATS, the company’s meal ordering and delivery platform.

When UberRUSH debuted in 2015, the company hoped that its courier delivery service could leverage Uber’s driver network, tech platform, and deep pockets to replicate the success of its primary business. However, in early 2017 the company shuttered its UberRUSH service for restaurants, encouraging them to move over to UberEATS instead. The service’s website lists the same areas of operation (SF, Chicago, and NYC) as it did upon launch, and the company has barely a handful of job listings that mention UberRUSH by name.

Our cross-functional analysis of the nearly 2,000 job titles we collected revealed Uber’s priorities here. Nearly 14% of Uber’s active openings (or over 250 jobs) list UberEATS explicitly in the job title.

Uber faces stiff challenges here from other tech rivals, as dominant US player GrubHub Seamless recently acquired Foodler and Eat24 to further bolster its leading position. Amazon, too, may encroach further on the food meal delivery space following its Whole Foods acquisition. Internationally, Uber must contend with formidable local competitors across regions, much like its core ride-hailing market. These include Delivery Hero and Just Eat in Europe and Ele.me in China, just to name a few.

Despite this, Uber is actively seeking talent to expand UberEATS internationally; just 31% of its UberEATS-titled jobs are based within the United States, with the remainder spread across the globe. As with Uber’s job listings overall, India again appears as the most active country outside of the US. Beyond India, Singapore, Australia, and Mexico all rank among the company’s top current UberEATS hiring destinations. Uber is fielding nearly as many open UberEATS positions for Australia as it is for the whole of Europe combined.

OTHER INITIATIVES: FREIGHT BROKERAGE AND FLYING CARS (UBER FREIGHT AND UBER ELEVATE)

Uber’s brokerage efforts are still in their nascent stages, with Uber Freight having formally launched in May 2017 following a soft launch late last year. Its service aims to connect shippers needing to move cargo with truckers. The idea is not a new one, as our trucking market map highlights the considerable competition Uber faces in the broker space:

Uber Freight is rolling out in a handful of areas, including the Chicago area, California, Arizona, Georgia, and the Carolinas. The company listed 17 open positions with “Uber Freight” job titles as of 8/29/2017, showing ongoing recruiting but a gradual effort far from the ramp-up of other services like UberEATS (and another departure from the company’s signature aggressiveness).

Of note, Uber’s new CEO is an existing investor in Convoy, among the brokerage startups that has been referred to with the “Uber for trucks” moniker. Khosrowshahi may now need to divest his shares in the company due to a conflict of interest with Uber’s new Freight initiative.

Finally, one of Uber’s most fringe initiatives is its Elevate project, which aims to field on-demand urban transport with flying taxis. The company held a 3-day summit in 2017 around the topic, but listed almost no open positions explicitly for Elevate. It remains to be seen whether the company will be able to spread its resources across multiple engineering projects from autonomous cars and trucks to flying taxis, not to mention its global expansion efforts.

FINAL WORDS

Uber is very much at a crossroads as it seeks to leave the worst of its traits behind it, while carrying forward the vision of growth and boundless opportunity that initially defined the optimism around it. It seems unlikely that the company will able to continue investing scattershot across global markets and various projects, especially as Dara Khosrowshahi looks to get Uber’s finances in order.

There are potential parallels here to Alphabet, a tech giant obviously at a very different stage of maturity and financial health, but one that also saw new management (under CFO Ruth Porat) begin to rein in a sprawling web of business units and instill financial discipline across its many experimental initiatives.

Despite the negative sentiment towards the company, Uber’s basic financials and hiring data still show an organization that has the potential for rapid growth. Going forward, Uber’s greatest strategic challenge will be rewriting its playbook of venture-financed expansion to move towards a more profitable and sustainable model of growth.

News for Uber

Uber’s Strategic Financial Growth and Investment Opportunity: An Analyst’s Top Sector Pick

In a report released today, Nikhil Devnani from Bernstein reiterated a Buy rating on Uber Technologies ( UBER – Research Report ), with a price target of $95.00 .

Nikhil Devnani’s rating is based on the compelling discussion points from a recent meeting with Uber’s new CFO, Prashanth Mahendra-Rajah, and the company’s robust financial projections. The conversation revealed a strategic emphasis on profitable growth and a disciplined investment approach, where Uber prioritizes initiatives and is prepared to discontinue underperforming ones. This approach is a delicate balance that aims to allow growth initiatives sufficient time to mature financially. Furthermore, Devnani sees promise in the company’s plans for expansion, including its goals for audience growth and increased service frequency even in established markets, which are central to its medium-term growth strategy.

Devnani also points to Uber’s potential for consistent financial performance enhancement, as the company is expected to achieve margin expansion through both variable and fixed cost leverage. His projections suggest that Uber’s margins could increase significantly, with the 2026 estimate of 5% of gross bookings (GB) still being conservative compared to the company’s long-term target of around 7%. Additionally, the planned deployment of excess capital and free cash flow for sustained capital returns reinforces the view that Uber is poised for ongoing growth. Based on these evaluations, Devnani has selected Uber as the top pick within its sector, particularly after considering the recent decline in stock price, indicating a strategic opportunity for investors.

In another report released on May 27, RBC Capital also maintained a Buy rating on the stock with a $80.00 price target.

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Uber Technologies (UBER) Company Description:

Founded in 2009, Uber Technologies, Inc. is a San Francisco, California-based transportation networking company that offers a ride-hailing service. It also has a food order and delivery business called Uber Eats, and a freight transportation business called Uber Freight.

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Uber Might Not Be The Next Amazon, But That's Not An Investment Thesis To Sell

Uber is often compared to the e-commerce giant Amazon, and it has become common practice to draw investment conclusions based on such comparisons.
On the contrary, I find many differences between the two companies, and Uber, in fact, has stark similarities with another high-growth company from a valuation viewpoint.
Uber will fail to make ends meet with its current business model, but important changes are taking place.
The market value of Uber will depend on the outlook for the industries the company operates in and the progress made by the company toward becoming profitable.
The story behind the company is a key driver of market value, which is often ignored by critics.

Uber might not be the next Amazon but it could still deliver stellar returns to investors in the long run

Uber Technologies, Inc. ( NYSE: UBER ) has recently come under heavy criticism for its inability to generate sufficient earnings to justify the seemingly high valuation multiples attached to its stock. There's no denying that Uber has a long way to go to become the company it aspires to be. Nonetheless, Uber bears, in my opinion, are getting it wrong from a valuation perspective. While I would not add to my existing position in Uber at the current price level (because I'm a fan of seeking a high margin of safety when investing in growth companies), the recent developments do not give me enough reason to book my profits. In this analysis, the common misconceptions about valuing Uber will be discussed along with growth projections.

Uber is not and will never be an Amazon

Uber has often been compared to Amazon.com Inc. ( AMZN ), and many articles can be found on the internet (such as this one ) that compares the post-IPO era of Uber to that of tech giants including but not limited to Amazon and Facebook Inc. (FB). On the flip side, bears have argued the fact that Amazon was cash flow positive within a few years from its establishment, but Uber is nowhere close to achieving this feat even though it has been in existence for over a decade.

	Uber	Amazon
Establishment	2009	1994
First profitable year (excluding unusual items)	NA	2003
First cash-flow-positive year	NA	2002

Source: Company filings and Seeking Alpha Premium

It took Amazon less than a decade to become profitable and to generate positive cash flows, whereas Uber has found itself in an uphill battle to reach either of these milestones. Amazon disrupted not only one industry but also many. In fact, the company grew rapidly to become the go-to e-commerce solutions provider in literally every corner of the world, and the addressable market opportunity for Amazon was and is humongous. In addition to being the leading online marketplace in the world, Amazon is one of the leading players in the cloud computing industry that is growing in leaps and bounds as well. The two companies, in my opinion, could not have been any more different.

The expectation that Uber would turn out to be the Amazon of transportation is something CEO Dara Khosrowshahi seems to have originated. Below statements by the CEO date back to the pre-IPO period in 2019:

Cars are to us what books are to Amazon. Just like Amazon was able to build this extraordinary infrastructure on the back of books and go into additional categories, you are going to see the same from Uber. ( Bloomberg article ) We want to kind of be the Amazon for transportation. ( Cnet article ) Just like Amazon sells third-party goods, we are going to also offer third-party transportation services. ( New York Times article )

Agreeing with the bears, I believe Uber would never be able to become an Amazon. In fact, no other company is likely to become an Amazon due to its sheer scale and the infinite number of industries the company is disrupting. Speaking about Uber on CNBC last year, Aswath Damodaran said :

The Amazon analogy has been carried too far and is being used as an excuse to justify high pricing for every money-losing, Silicon Valley venture.

This does not mean that Uber would not be able to disrupt the transportation industry on a global scale and that Uber would never be profitable. More importantly, this is by no means an indication that Uber should not trade at high valuation multiples.

Damodaran has remained skeptical about the big promises of Uber, but he is a well-known strong believer of the fact that any stock could be attractive at a certain price. Proving this once again, he revealed an investment in Uber at the lows of around $14 when Barron's interviewed him in June to gauge a measure of his expectations for the market performance.

Here's a better (but not popular) comparison to Uber

Uber, for now, is a story stock. In case a reader is not familiar with this classification, I strongly recommend reading the work of Prof. Aswath Damodaran. For a summary of how to value story stocks and the required adjustments to traditional valuation models to derive a more realistic value for a story-driven company, you may want to read a piece on the subject I published on Seeking Alpha a couple of months ago.

Tesla Inc. ( TSLA ), as far as I see, is a much better comparison to Uber than Amazon for several reasons. Tesla has struggled to remain profitable consistently despite reporting stellar numbers during a few quarters over the last decade. The company turned operating cash flow positive only during the 2018 financial year and the company has invested billions of dollars to build the necessary infrastructure including manufacturing plants to help the company gain market share in important territories such as China. Even though Tesla was in "investment mode" over the last decade, the stock has handsomely beaten the market and delivered stellar returns to investors who believed in the story of the company.

Source: Seeking Alpha

As much as Uber wants itself to be compared with Amazon, the company resembles many aspects that we are already familiar with about Tesla. The overarching reason behind Tesla's massive gains in the market is that investors, especially growth-oriented investors, have continued to believe in the fact that Tesla is disrupting a very lucrative segment of the automobile industry.

The same is true for Uber.

The $62 billion market cap of Uber for sure sounds daunting at first when we compare this with the financials of the company, but the true factor that is driving the stock price, whether it be up or down, is the story behind the company. In other words, the belief that ridesharing is the future of transportation and that Uber will remain the clear leader of this industry despite the looming threats from its competitors.

It would be incorrect to assume that I'm a fan of valuing stocks entirely based on stories without regard for the numbers. On the contrary, I'm a strong believer and a disciple of relying on numbers when it comes to business valuation. The key, however, is to strike a balance between the numbers and the story of a company and then to look for the right numbers. More on why I'm bullish on Uber in the next segment.

A blessing in disguise?

Both the New York City and Seattle City have passed a minimum pay standard for Uber (and for other companies that conveniently classified drivers as contract workers). This doesn't look promising news for Uber, but the long-term impact of such legislative actions could turn out to be surprisingly positive.

Uber's strategy, so far, has been to saturate the market with drivers and to expand its horizons as infinitely as possible. The minimum pay rules, however, will force the company to take a serious look at this strategy and to shift its focus to bring in positive earnings by improving the efficiency of its business operations.

The improvements in Uber's gross margins in the last couple of years have come at the expense of payments for drivers, which is a strategy that is destined to fail in the long run. Not surprisingly, the driver churn has increased to dramatic levels, which has resulted in hefty sales and marketing costs to acquire and train new drivers. CBI Insights reported that only about 20% of drivers remain on Uber's platform after one year, and the primary reason behind such a sky-high turnover rate is the disappointing earnings by driving for Uber. A closer look at the financials of the company reveals that Uber has spent billions of dollars per year to attract new drivers to the platform, which the company considers as an investment because of its stance on scaling up the company.

The new pay rules in New York City have already forced the company to reduce the number of drivers employed in the respective jurisdiction, and the expectation for Seattle is similar. Even though Uber would find the situation difficult to deal with at first, I expect this new reality to trigger a change in the decision-making process of the management that would eventually push Uber from the "investment phase" to the "earnings phase" of its business cycle.

The idea behind expanding the horizons of a company is to achieve economies of scale. In Uber's case, the company has so far failed to realize any such benefits despite the multi-billion dollars it has already invested to become the largest ridesharing company in the world. For a loss-making venture such as Uber, scaling down temporarily could become a blessing in disguise as it allows the brains behind the business to identify opportunities to improve the efficiency of the company and to make radical changes in the organization structure which would have been impossible otherwise.

In his book "The Origin and Evolution of New Businesses" , Amar Bhide wrote :

Many giga-businesses have no clue, when they start, about how they will become behemoths - think Microsoft developing Basic for the Altair in 1975, Sam Walton starting a country store, and Hewlett and Packard selling audio-oscillators. But being small, they can experiment to figure out what is profitably scalable and make radical changes if necessary.

With more states and jurisdictions around the world threatening to have a close inspection of Uber's business model and the manner in which they treat partner drivers, the company will certainly consider pausing its massive bonus schemes to attract new drivers and find a permanent solution to the high turnover rate of drivers.

The big picture

There's no denying that investing in Uber is only for growth investors with above-average risk appetite because many things could still go wrong with Uber. The ridesharing giant is yet to finetune its business model meaningfully, and growth at any cost is not a viable strategy in the long run. The first fix should come in the form of taking a step back in its driver acquisition costs. Uber cannot pay its drivers any less, and charging riders a higher amount could drive them to competitors such as Lyft. Uber is stuck in between, and this is not working for the company. Uber, in the recent past, has focused on existing markets where the company is unlikely to be the dominant player and examples include the Eats India segment and the ridesharing business in China. This strategy of shifting its focus to core markets is likely to help the company trim operating costs and report positive earnings sooner than expected. If the ridesharing industry grows into an oligopolistic market structure where certain companies dominate certain market segments, Uber stands in a good position to drive its earnings growth.

Adjunct professor of finance at Wharton David Wessels believes fine-tuning the business model to focus on key markets is the only way Uber can survive. In a note about the company, he wrote :

It's not like there are 40 competitors out there. It has one or two competitors nipping at their heels, who have their own problems to deal with. So, this could be a successful business, but at some point, they're going to have to get serious.

Uber CEO Dara Khosrowshahi used the words "efficiency", "cost-cutting", and "business model changes" multiple times during the second-quarter earnings call while discussing the way forward for the company in the years ahead. A lot will depend on how the business model would change in the immediate future.

The outlook for ridesharing companies and food delivery services looks promising, and I discussed this in great detail in my first article on Uber on Seeking Alpha. To summarize:

The mobility-as-as-service market (MaaS) is projected to report a higher growth in miles traveled than miles traveled on personal vehicles in the coming decade. This gives Uber the opportunity to earn higher revenue even if its market share remains stagnant.
Uber, even though is the leader of the ridesharing industry, still accounts for less than 1% of total miles traveled globally. This is a good indication of the addressable market opportunity for ridesharing companies.
The successful rollout of autonomous vehicles in the future will help ridesharing companies achieve higher margins by investing in a fleet of vehicles.
The growing internet penetration rates in developing countries increases the size of the target market for both the ridesharing and food delivery business.

The big picture remains positive, but Uber still has a long way to go. With more than $7 billion in cash, Uber is in a good position to weather the current economic downturn, and I believe this virus-induced recession and the recent changes to minimum payment requirements imposed by state governments will push Uber to make some important changes to its business structure that are long due.

It's quite easy to be mechanical about valuing stocks. This, however, could lead to undesirable circumstances and to missed opportunities. A stock that is driven by a story is likely to remain a darling of growth investors as long as the company is making progress. Uber, arguably, falls into this category of stocks along with the likes of Tesla and Zoom Video Communications, Inc. ( ZM ). Because the big picture looks promising, Uber stock is unlikely to trade at multiples that are seen as conservative unless otherwise the market crashes and carries Uber with it. In March, I suggested that it was the best time to buy Uber, and I can no longer write the same to conclude this article. However, the investment conclusions drawn by analysts who compare Uber to Amazon, in my opinion, leave behind a few critical points about Uber and its valuation level. The question is whether the ridesharing industry will thrive, and my answer is in the affirmative. In this case, Uber will naturally deliver stellar returns to investors in the long run. For this reason, I am holding the stock.

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This article was written by

Analyst’s Disclosure: I am/we are long UBER. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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A decade later, Uber's IPO could mean a massive return on investment for many of its investors. breakdown of top stakeholders. Using Uber's S-1 filing, we calculated how much its top investors' shares are worth, based on its $45 a share IPO price. Here's the breakdown of Uber's top investors, from co-founders to key institutional ...
Uber's Stock Surge: Navigating All-Time-Highs Ahead Of Q4 Earnings
UBER Q4 earnings report expected to show 15 cents in EPS and $9 billion in revenues before market hours. Stock up over 105% in past year. Stock trading at all-time-highs. ... Uber Investment Thesis .
(PDF) Management Analysis of Uber
Abstract and Figures. Uber Technologies, Inc. is an American multinational transportation network company (TNC) offering services that include peer-to-peer ridesharing, ride service hailing, food ...
Uber: Eyeing Net Profit In 2023
We remain buy-rated on Uber, as our investment thesis that the company is on its way to achieving profitability is playing out. Uber is the dominant ridesharing company in the U.S. market and is ...
Uber Strategy Teardown: The Giant Looks To Autonomous Future, Food
Uber is known for many things, but one thing that has remained constant is its ability to steal the spotlight. Once the darling of tech media, one of Silicon Valley's most lauded growth stories, and the progenitor of an entire category of on-demand startups, Uber's tumultuous 2017 has seen the company's fortunes shift almost overnight. ...
Uber's Strategic Financial Growth and Investment Opportunity: An
The conversation revealed a strategic emphasis on profitable growth and a disciplined investment approach, where Uber prioritizes initiatives and is prepared to discontinue underperforming ones ...
Uber records first annual profit as market value approaches $150bn
Operating profit in 2023 was $1.1bn, compared with a $1.8bn loss in 2022, with fourth-quarter operating income of $652mn comfortably beating forecasts. Uber also reported a net profit of $1.9bn ...
Uber Might Not Be The Next Amazon, But That's Not An Investment Thesis
Uber is often compared to the e-commerce giant Amazon, and it has become common practice to draw investment conclusions based on such comparisons. ... But That's Not An Investment Thesis To Sell ...
Uber Investment Thesis
1. Uber is often compared to the e-commerce giant Amazon, and it has become common practice to draw investment conclusions based on such comparisons. 2. On the contrary, I find many differences between the two companies, and Uber, in fact, has stark similarities with another high-growth company from a valuation viewpoint. 3.