Uber Earnings: Profitable Growth Marks Another Strong Quarter

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

Uber Technologies UBER reported solid financial results for the third quarter. Gross bookings grew 16% year over year to $41 billion. Total trips grew 17% to 2.87 billion from a year ago. Also, the adjusted EBITDA margin improved by 335 basis points year over year to 15.1%.

Why it matters: While economic conditions continue to pressure consumers, we were impressed by Uber’s ability to show strength on both the top-line and profitability fronts. Net revenue expanded 20% year over year and 5% sequentially to $11.2 billion.

• Mobility sales continued to drive the top line, growing 26% year over year to $6.4 billion. Uber improved its overall take rate—net revenue divided by gross bookings—by 100 basis points year over year to 27.3%.
• The firm also saw broad-based strength, with trips (17%), monthly active platform customers (13%), frequency (4%), and average net revenue per user (9%) all growing at a healthy clip year over year.

The bottom line: We maintain our fair value estimate of $80 per share and view the stock as fairly valued, even after accounting for the sharp drop in price following the earnings report.

• While the firm’s outlook for the fourth quarter was in line with our model, we believe investors were underwhelmed by the expected 18% year-over-year growth in gross bookings in constant currency.
• We continue to highlight Uber’s strong network effect, which should allow the firm to scale profitably as customer acquisition costs decline while the top line remains healthy. We saw evidence of this with Uber hitting the quarterly $1 billion GAAP operating profitability mark for the first time.

Big picture: There have been some investor concerns about the impact of autonomous vehicle taxis and potential disruption to the ride-hailing space. We see partnerships with AV firms like Waymo as an opportunity for Uber to leverage its strong global network.