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Uber Sells Stake in Joint Ventures to Yandex

While this transaction will improve Uber's liquidity position, it will not affect our fair value estimate of this narrow-moat stock.

Uber UBER is selling its equity stake in the two joint ventures it created with Yandex to Yandex for possibly around $2.8 billion in cash, which is above the $1 billion carrying value that Uber reported at the end of the second quarter. While this transaction will improve the firm’s liquidity position, it will not impact our $69 fair value estimate of this narrow-moat and 4-star stock. Uber will receive $1 billion by the end of this year for all its holding in an autonomous joint venture with Yandex, the Yandex Self-Driving Group; and for 4.5% of MLU, the joint venture that includes delivery and mobility platforms. The deal also includes a 2-year call option for Yandex to purchase the remainder of Uber’s stake in MLU for between $1.8 billion and $2 billion.

We continue to view the stock as attractive as Uber’s network effect moat source remains intact, which with higher ride-hailing demand, the supply of drivers is likely to increase without aggressive spending on driver acquisition. We also think the integration of Uber’s mobility and delivery platforms will continue to ease cross selling and lower acquisition costs of consumers and drivers, which will result in higher take rates and margin improvement. We continue to expect the firm to hit quarterly adjusted EBITDA profitability by the end of this year, full-year positive adjusted EBITDA next year, and full-year GAAP profitability in 2024.

We think the market is discounting Uber’s valuation based on the assumption that Uber mobility will not recover and the firm will not continue to benefit from the strong delivery business. Uber is trading at only 4 times 2022 revenue. We have modeled a 29% three-year revenue CAGR. Its peers with less diversified businesses include Lyft and DoorDash. Lyft, which is mainly a ride-hailing platform, is trading at a comparable 3.8 times revenue, while DoorDash, a delivery platform, trades at 11.6 times revenue. Our Uber fair value estimate represents approximately 6.8 times revenue.

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