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Uber Earnings: Firm Delivers On Profitability, Which Will Grow Impressively With Revenue

We’ve increased our fair value estimate of Uber stock.

Uber taxi sign on top of a car.

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What We Thought of Uber’s Earnings

We are increasing our fair value estimate for Uber UBER to $74 from $68. The firm continues to execute on all fronts, further strengthening its network effect. Its fourth-quarter results included growth in users, requests, frequency, user monetization, and suppliers.

The company’s efforts to further diversify its services are bearing fruit. Grocery delivery is on pace to represent more than 5% of its total gross bookings. With stronger cross-selling capabilities due to its network effect, Uber is likely to attract and maintain more users and limit growth on other platforms, including Maplebear’s CART Instacart. Growth on the delivery side is also impressively driving higher-margin advertising revenue. While Uber is enjoying continuing growth in drivers, Lyft LYFT has increased its efforts to veer a few toward its platform more often, as its mobility platform remains a bit undersupplied.

We did not make significant adjustments to our revenue projections, but we are now assuming speedier and higher-margin expansion, as Uber’s flywheel is further lessening customer and driver/courier acquisition costs, in addition to the firm now operating leaner. We are confident that Uber will remain GAAP-profitable this year and beyond.

Gross bookings came in at $37.6 billion (up 22% year over year), driven by growth in mobility (29%) and delivery (19%), partially offset by a decline in freight. Total net revenue increased 15% to $9.9 billion, with lower delivery take rates mainly due to changes in business models in some markets that had no impact on the bottom line. The Uber platform’s flywheel continued to spin, shown by an increase in users (15%), orders (24%), order frequency (8%), average gross booking per order (1%), and drivers (30%).

Adjusted EBITDA increased to 3.4% of gross bookings from last year’s 2.2%, due to improved delivery margins. Free cash flow of $768 million was a significant improvement from the $303 million cash burn last year.

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