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Stock Analyst Update

Uber Plans to Sell ATG; Profitability Path Clearer

We're raising the technology firm's fair value estimate to $61 per share.

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Uber Technologies (UBER) has announced the sale of its autonomous vehicle technology business, ATG, to Aurora, an autonomous vehicle technology company, for an equity stake in Aurora. Uber will also invest $400 million in Aurora when the deal closes (likely in the first quarter of 2021), after which Uber will own around 26% of Aurora. Uber CEO Dara Khosrowshahi will also have a seat on Aurora’s board. We applaud this deal for two reasons. First, it removes the drag that ATG has on Uber’s bottom line because of the necessary high investments in research and development. Second, the agreement positions Uber to benefit from the possible transition to autonomous vehicle-based mobility and delivery in future as this agreement also includes a partnership in which Aurora’s future self-driving cars will use Uber’s platform.

We estimate this sale will remove around $400 million in annual adjusted EBITDA losses and will allow Uber to generate full-year positive adjusted EBITDA and operating income in 2022 and 2023, respectively; both a year earlier than we had previously assumed. We continue to expect the firm to become GAAP profitable in 2024. We have raised our fair value estimate to $61 per share (from $59).

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Ali Mogharabi does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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