Uber Fair Value Upgraded

We are raising our fair value estimate to $73 and we view narrow-moat Uber as attractive

Ali Mogharabi 11 February, 2022 | 9:40AM
Facebook Twitter LinkedIn

Uber on Screen

Uber (UBER) posted strong fourth-quarter 2021 results with the top and bottom line exceeding the FactSet consensus estimates. Demand for delivery remained strong and the segment generated positive adjusted EBITDA for the first time, which the firm expects to continue. Mobility demand continued to approach pre-pandemic levels, which further attracted drivers and stabilised prices for riders, expanding the adjusted EBITDA margin, displaying the platform’s strong network effect moat source. We were also pleased with the firm’s ability to further monetise the platform via advertising and other verticals.

Management guided to first-quarter year-over-year gross bookings growth deceleration due to a slight impact from omicron, which appears to have already peaked. While we expect a slowdown in mobility and delivery gross bookings and net revenue growth in 2022, we have increased our projections given the strong end to 2021, what we view as progress toward normalcy already in 2022, and a larger contribution from advertising revenue. After adjusting our model, we are raising our fair value estimate to $73 from $69. Trading at 0.55 times our fair value estimate, we view narrow-moat Uber as attractive.

Uber generated $25.9 billion in total gross bookings during the quarter, up 51% year over year, with contributions from mobility (up 67%), delivery (34%), and freight, which spiked 245% from last year due to the acquisition of Transplace. Mobility gross bookings hit 84% of pre-pandemic levels during the quarter, up from 79% in the third quarter. It appears that normality after the pandemic includes not only spending more time out of home and traveling, but also still ordering food and other products online for delivery or pickup as delivery continued to grow. While the mobility take rate dipped, the delivery take rate increased 60 basis points from last quarter and around 5 percentage points year on year.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Facebook Twitter LinkedIn

About Author

Ali Mogharabi  is an equity analyst for Morningstar

© Copyright 2024 Morningstar, Inc. All rights reserved.

Terms of Use        Privacy Policy        Modern Slavery Statement        Cookie Settings        Disclosures