Uber Reports Impressive Q4; Strong 2023 Growth Expected

Uber Stock at a Glance

• Current Morningstar Fair Value Estimate: $68
• Stock Star Rating: 4 Stars
• Economic Moat Rating: Narrow
• Moat Trend Rating: Stable

Uber Earnings Update

Further strengthening its network effect-based moat, Uber (UBER) again reported an impressive quarter with year-over-year growth in users, order frequency, and monetization. Top-line growth generated additional operating leverage and margin expansion.

We were impressed with management’s confidence in having a profitable quarter, on a GAAP basis, this year which supports our assumption that the firm will hit full-year GAAP profitability in 2024. While Uber’s first-quarter outlook indicates continuing strong growth through 2023, we have lowered our gross bookings and revenue projections modestly as an economic downturn will likely weaken demand.

We’re reducing our fair value estimate to $68 from $73, but continue to view narrow-moat-rated Uber as attractive as it still trades in 4-star territory. Uber’s results also bode well for Lyft and for DoorDash.

Total fourth-quarter revenue came in at $8.6 billion (up 49% year over year and 59% on a constant-currency basis) on gross bookings of $30.8 billion (up 19% year over year and 26% on a constant-currency basis) which translates into a 28% take rate, higher than the previous year’s 22%. The higher take rate is partially due to the firm including driver incentives in some markets such as the United Kingdom as part of the cost of revenue.

Overall users and trip requests increased 11% and 19% year over year, respectively, to 131 million and over 2.1 billion. Frequency, or trips per user per month, increased at its fastest rate (7%) since the second quarter of 2021 when pandemic-driven pent-up demand drove 12% growth. However, at 5.4 trips per user, usage remains below the prepandemic level of around 5.5 in 2018 and 5.7 in 2019. Higher volume increased user monetization by 35% from the prior year. The supply side of the platform also improved as the driver count reached an all-time high in the quarter, according to the firm.