Uber Earnings: Strong Delivery Growth Helps Ease Some (but Not All) Mobility Concerns

Key Morningstar Metrics for Uber Technologies

• Fair Value Estimate
  : $76.00
• Morningstar Rating
  : ★★★
• Morningstar Economic Moat Rating
  : Narrow
• Morningstar Uncertainty Rating
  : Very High

What We Thought of Uber Technologies’ Earnings

Uber Technologies UBER reported strong third-quarter earnings, with revenue up 10% and adjusted EBITDA rising 31%. Delivery bookings rose 22% and are now within $1 billion of mobility, which rose 18%. However, the firm issued slightly soft fourth-quarter profit guidance.

Why it matters: Uber’s platform continues to demonstrate its flywheel, with new users and trips per user growing across mobility and delivery. Uncertainty over autonomous vehicle adoption remains a concern.

• We expect mobility growth to slow in the long term, but international driver shortages, in part due to high fuel prices, are a new concern. If driver shortages continue, Uber may be forced to adopt AVs faster rather than on an as-needed basis, which might hurt unit economics. Uber expects 700 AVs on the platform by year-end.
• Delivery momentum has picked up as order frequency, aided by strong Uber One penetration, reached a record high. Grocery and retail deliveries stand out, as expanded partnerships with Costco and other retailers drive growth. We expect this to continue once the Delivery Hero acquisition closes.

The bottom line: We are maintaining our $76 per share fair value estimate for narrow-moat Uber. We view shares as fairly valued, with our delivery optimism tempered by uncertainty about the speed and style of AV deployment Uber will pursue and the resulting economics.

• We view asset-light AV partnerships as the most desirable form of AV exposure for Uber. However, one of the largest AV providers, Waymo, has increasingly entered new US cities alone, increasing the odds Uber will have to finance AVs itself and hold them on its balance sheet.

Between the lines: DoorDash agreed to acquire Instacart, which also held talks with Uber. While we would have liked the increased exposure to local commerce delivery, which is growing rapidly, we believe DoorDash could offer a better deal because it can derive greater synergies from Instacart than Uber can.