Uber Earnings: Moderating Growth but Increasing Operating Profitability

Morningstar’s Metrics for Uber Technologies

• Fair Value Estimate: $84.00
• Morningstar Rating: ★★★
• Morningstar Economic Moat Rating: Narrow
• Morningstar Uncertainty Rating: Very High

What We Thought of Uber Technologies’ Earnings

Uber Technologies UBER announced that its first-quarter gross bookings narrowly beat management guidance, while net revenue slightly missed FactSet analyst expectations for the first time in five quarters. Adjusted EBITDA margin reached an all-time high of 16.2%.

Why it matters: We are seeing parallels between the convenience leaders in which growth moderates but remains strong, indicating top-of-class network effects.

• Uber’s total trips, core user base, and engagement trends took a standard first-quarter seasonal dip, but these dips are smaller in consequence relative to previous years, thanks to the network’s critical mass that has accumulated over time.
• Operating profitability and operating leverage continue to impress. Adjusted EBITDA grew 35% year over year, with all major cost line items trending downward as a percentage of net revenue thanks to the low marginal cost of servicing more customers.

The bottom line: We maintain our narrow moat rating and Very High Uncertainty Rating while raising our fair value estimate $79 per share to $84, largely due to a reduction in car insurance headwinds and an improving operating profitability outlook.

• Uber’s platform now has 170 million users relative to DoorDash’s 42 million and Lyft’s 25 million. We believe this scale creates a robust moat, with a virtuous cycle in which strong demand depth reinforces supply stickiness which then encourages more demand depth.

Big picture: We believe Uber is the ideal partner within the autonomous vehicle supply chain, thanks to its ability to drive high utilization of vehicles.

• Out of the approximately 100 Waymo vehicles exclusively available on the Uber application in Austin, Texas, Uber states that these vehicles are now more productive than 99% of all drivers in the city.