Strong Q3 Indicates Uber May Be Resistant to Macro Uncertainties

Uber Stock at a Glance

• Current Morningstar Fair Value Estimate: $73.00
• Uber Stock Star Rating: 5 Stars
• Economic Moat Rating: Narrow
• Moat Trend Rating: Stable

Uber Earnings Update

We were pleased with Uber’s (UBER) impressive third-quarter results as the firm saw strong demand and generated positive adjusted EBITDA and free cash flow. Uber continues to progress toward GAAP profitability, which we still project will be in 2024. Improvements on the demand and supply sides of the platform indicated further strengthening of Uber’s network effect moat source. Surprisingly, with significant macro uncertainties in the U.S. and globally, management still sees higher demand in the fourth quarter. We are maintaining our $73 fair value estimate. While the stock is up 13%, we still view the shares of this narrow-moat firm as attractive.

Total gross booking increased 26% year over year to $29.1 billion, with 38% and 7% growth in mobility and delivery, respectively. On a constant currency basis, gross booking in those segments increased 45% and 13%. The firm again experienced year-over-year growth in user count (14% to 124 million) and total requests (19% to 1.95 billion), which drove usage frequency higher to 5.3 uses per month per user during the quarter from 5.0 last year. In mobility, as we expected, more drivers have joined the platform, hitting prepandemic levels and improving wait times, although they remained slightly longer than 2019 levels as rider demand continues to remain stronger than before the pandemic.

Take rates came in at 27.9% and 20.2% for mobility and delivery, respectively, compared with last year’s 22.3% and 17.4% as the firm now includes driver incentives in cost of revenue. Without this change, take rates were comparable to the prior year excluding similar changes. Foreign currency headwinds partially offset the overall strong demand, resulting in $3.8 billion (up 73%) and $2.8 billion (up 24%) in net revenue for the mobility and delivery segments, respectively. On a constant currency basis, the segments grew 83% and 33% from last year.