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Uber's IPO Looks Attractive

We still value the narrow-moat company at $58 per share, as Uber Eats is outperforming our expectations.

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In light of  Uber Technologies’ UBER S-1 filings and upcoming IPO, we’ve updated our views on the company’s competitive position and financial prospects, which we initially published in July 2018. After reviewing the additional metrics and disclosures in the S-1, we have even greater confidence in our narrow economic moat rating and $110 billion valuation estimate for Uber.

Despite Uber’s market leadership and high penetration in ride-sharing, it appears that its growth in that space is decelerating faster than we initially anticipated, and the same may be true for its peers, such as Lyft (LYFT) . On the upside, Uber has grabbed market share in food delivery much more quickly than we expected, and we think strong growth potential for that service remains. We now estimate a $650 billion total addressable market for Uber by 2022, which may grow to over $1 trillion in 10 years, up from our July 2018 estimate of $630 billion. We continue to expect the company to become profitable and generate excess returns on invested capital on the back of moat sources such as network effects and intangible assets associated with user data. While CEO Dara Khosrowshahi has righted the ship after Travis Kalanick’s departure, we maintain our very high fair value uncertainty rating as Uber continues to face various regulatory and legal matters.

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

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