Uber Beats Top- and Bottom-Line Expectations
We believe that investment in narrow-moat Uber requires patience, and view the stock as attractive.
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.
|Morningstar Premium Members gain exclusive access to our full analyst reports, including fair value estimates, bull and bear breakdowns, and risk analyses. Not a Premium Member? Get this and other reports immediately when you try Morningstar Premium free for 14 days.|
Ali Mogharabi does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.
Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.
We’d like to share more about how we work and what drives our day-to-day business.
We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.
How we use your information depends on the product and service that you use and your relationship with us. We may use it to:
To learn more about how we handle and protect your data, visit our privacy center.
Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.
To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.
Read our editorial policy to learn more about our process.