Uber Earnings: Network Effect Continues to Drive Profitable Growth for Uber

Key Morningstar Metrics for Uber Technologies

• Fair Value Estimate: $80.00
• Morningstar Rating: 3 stars
• Morningstar Economic Moat Rating: Narrow
• Morningstar Uncertainty Rating: Very High

What We Thought of Uber Technologies’ Earnings

We maintain our fair value estimate of $80 per share for Uber UBER after the firm kicked off fiscal 2024 with strong financial results. As in previous quarters, we view Uber as being on top of its game, executing strongly on its business model while posting year-over-year growth in bookings, audience, frequency, and profitability.

Beyond quarterly results, we believe the firm’s network effect, leaner operation, and continuing gross bookings and revenue growth will likely create further operating leverage and drive impressive 20%-40% average annual adjusted EBITDA growth over the next three years. With shares selling off after the earnings report, likely due to the results not meeting near-term investor expectations, we view the stock as undervalued.

Gross bookings came in at $37.6 billion (up 20% year over year), driven by growth in mobility (25%) and delivery (18%), partially offset by a decline in freight. Total net revenue increased 15% to $10.1 billion, with lower year-over-year delivery take rates mainly due to changes in business models in some markets that had no impact on the bottom line. The network effect around Uber’s business continued to bear fruit, as evidenced by an increase in users (15%), trips (21%), order frequency (6%), and average revenue per user (4%).

Uber also showcased its ability to expand its margins while maintaining strong topline expansion. Adjusted EBITDA increased to 3.7% of gross bookings from last year’s 2.4% due to improved delivery margins.

Uber’s efforts to build a recurring revenue stream also appear to be going well. Uber One adoption remains strong with members, accounting for almost a third of mobility and delivery gross bookings. Encouragingly, member retention also tracked up 200 basis points year over year.