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Stock Analyst Update

Uber Beats Top- and Bottom-Line Expectations

We believe that investment in narrow-moat Uber requires patience, and view the stock as attractive.

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Riders, trips, and their frequency grew strongly during the third quarter, providing support for our network effect-sourced narrow moat rating for Uber (UBER). Plus, improvement in take rates accommodated solid growth in gross bookings. The network effect moat source is also allowing Uber to more easily control costs which led to further improvement in adjusted EBITDA losses. All of this resulted in the company posting third-quarter results above the top- and bottom-line S&P Capital IQ consensus expectations. Uber expects to generate full-year adjusted EBITDA in 2021 as the rides segment expanded its adjusted EBITDA margin for the second consecutive quarter. Management also guided for sequential revenue growth acceleration in the fourth quarter. With continuing improvement in take rates, we upped our 2019 revenue projection. However, we still expect losses in Uber Eats, along with more aggressive investments in ATG, to delay Uber’s first full-year adjusted EBITDA until 2022, one year later than the firm’s goal.

While third-quarter numbers surprised to the upside, the stock is down 5% in after-hours, which we think may be due to the expected Nov. 6 IPO lockup expiration which could push the stock down much further. We continue to believe that investment in narrow-moat Uber requires patience. We are maintaining our $58 fair value estimate and continue to view the stock which is trading at a 0.51 price/fair value estimate as attractive.


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