Uber Technologies: +46.9%
A company that shows improvement in financials and business fundamentals while achieving financial targets is a company will likely see a sustained improvement in its share price. Uber Technologies is one such company. Uber outperformed both the Nasdaq and S&P 500 benchmarks which gained 20.6% and 10.5% respectively by returning 46.9%. Despite the significant increase in share price, we still think that the intrinsic value of the company is around 20% above its current trading price of $43.52, based on our updated in-house valuations.
To recap, Uber provides ride-hailing services and develops applications for road transportation, navigation, ride-sharing and payment processing solutions. The company operates three main segments, which are mobility, delivery and freight. All three segments are connected by Uber’s massive, efficient and intelligent network spanning millions of drivers, consumers, merchants, shippers and carriers along with underlying data, technology and shared infrastructure which enables the network to become smarter every trip and service.
The company’s latest 1QFY2023 ended March results showed great improvement, after finally achieving cash flow profitability for FY2022. Revenue and adjusted ebitda were up 29% and 353% respectively y-o-y, while operating cash flow greatly improved and free cash flow turned positive compared to the previous financial quarter. In terms of business fundamentals, the monthly active platform consumers (MAPC) grew by 13% while trips and gross bookings grew by 24% and 19% y-o-y. Take rates for the mobility and delivery segments also improved by 5.4% and 2.5% respectively, indicating better margins.
Some key business developments for Uber include a better advertising model and format, along with an app redesign to enable cross-platform usage, which should boost MAPC figures over the next few financial periods. Also, the company announced long-term partnerships with Google Cloud and Oracle to migrate its infrastructure to the cloud to become asset-light. For the mobility segment, Uber Taxi was launched in multiple new markets across Europe and South America, along with the introduction of the option for riders to choose Electric Vehicle (EV) rides. On the delivery side, the company has made new partnerships to support zero-emission modes of transportation for delivery couriers.
Uber’s outlook for the next financial quarter is overall positive, as it expects gross bookings and trips to grow by around 20% on average, along with a significant improvement in GAAP operating income. Over the medium to longer term, Uber expects to scale its GAAP profitability significantly beyond 2023.
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In terms of financial safety, Uber has a current ratio of 1.0 times, reflecting decent liquidity. As the company turns cash flow positive and improves on its cash flow generating ability, solvency should be less of a concern as the company currently has a net debt to equity of 0.85 times.
The stock has 45 “buy” calls, four “hold” calls, and one “sell” call, with a consensus target price of around 20% above its current trading price.
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Data for Charts & Tables were sourced from Bloomberg; Stock returns include capital adjustments and dividends, and excludes currency exchange fluctuations.
