Shares of Uber ( UBER ) had a poor run in 2024, lagging the broader market with only a 12% gain in the last 12 months. However, mine the bullish outlook remains intactgiven that the recent poor performance does not reflect any weakness in the company’s business fundamentals. The company has seen solid revenue and profit growth while generating impressive cash flow. The main factor influencing investor sentiment seems to be the fear that robotaxis could disrupt the ride-sharing industry in the coming years.
While this is a valid concern, it is undoubtedly a remote risk. Uber has the capacity to adapt to new technologies, underpinned by its flexibility to make new investments, diversify its business and maintain a financially viable ecosystem within the wider mobility industry.
In this article, I’ll share a few reasons why I believe Uber stock is worth considering to buy in 2025 and why the market seems to be ignoring it.
For starters, one of the first reasons I’m bullish on Uber lies in the value proposition of its ride-sharing and food delivery businesses. Look at The ultimate evolution of Uber over the past few years shows that the company’s revenue in the past twelve months amounted to almost 42 billion dollars, while in 2019 this figure was 13 billion dollars.
Considering that it has quadrupled its revenues in the last five years, I would not be surprised if that growth trend continues, albeit not as strongly, but with a certain intensity. More and more individuals have realized the convenience of ride sharing and food delivery. One possible cause of this trend may also be related to the rising cost of owning a car in many parts of the world, favoring the use of shared rides, especially in large cities.
As a result, analysts estimate that Uber’s top line could grow by 17.3% in 2024, followed by growth of 15.7% and 15.6% in 2025 and 2026, respectively. Moreover, with Uber set to report its second consecutive full year of profitability, projections suggest its EPS CAGR over the next three to five years will be an impressive 41.2%. Therefore, taking into account that Uber currently trades at a forward P/E ratio of 22.5x, if the long-term CAGR estimates prove accurate or close to that, Uber’s PEG ratio is 0.55, which seems very cheap.
Another piece of evidence that ties into my bullish outlook for Uber stock is that the company has been able to grow profit margins nicely in recent years as it has benefited from economies of scale. Currently, operating margins of 6.4% are significantly higher than the negative 75% recorded in 2020.
Much of this turnaround in operating margins over the past few years correlates with Uber’s small-asset business model, where drivers use their own cars (which eventually become Uber’s assets). Therefore, the company is able to increase its operations without a proportional increase in capital expenditure. This approach allowed Uber to generate $1.7 billion in free cash flow in the third quarter of 2024, up 133% year over year.
Although the company’s balance sheet is not flawless – the company has 10.9 billion dollars of long-term debt –it holds about $9 billion in cash, equivalents and short-term investments. This gives the company enough capital to fund growth initiatives. It also means cash and investment are unlikely to be a bottleneck for Uber, and the company can use some of its growing cash flow to gradually pay down long-term debt, reduce interest costs and increase profitability.
The third point where I see Uber as an excellent buying opportunity during 2025 correlates with the bearish momentum around its stock, overshadowed by Tesla’s (TSLA) robotaxi fears, where I see a certain tone of exaggeration. As shown in the graph belowduring 2024—especially the last quarter—there was a lot of hype surrounding Tesla’s stock announcement, especially with its upcoming robotaxi project set for 2025. This created a lot of negative sentiment toward Uber’s business model.
In theory, the fears are not unreasonable. Tesla CEO Elon Musk said last year that the Robotaxi service model would be a mix between Airbnb ( ABNB ) and Uber, where Tesla would own and operate a fleet of cars and sell them to private individuals who want to own their own robotaxis. However, according to Wedbush’s four-star analyst Dan Ivesthe reality of implementing Robotaxi is still far away. According to analyst comments from the beginning of this year“Our view is that while this is an exciting announcement about robotaxis, we don’t expect full autonomy (without steering models) until 2030.”
Another point in Uber’s favor is how diversified its business is beyond just ride-sharing. The company has built a highly profitable ecosystem where food delivery, logistics and transportation play key roles. In the third quarter, delivery alone accounted for 30% of Uber’s revenue, while freight accounted for 11%. Uber’s management team appears well-prepared to adapt to disruptive changes in the ride-sharing industry. Indeed, CEO Dara Khosrowshahi believes Tesla’s robotaxi project will rely on the resources Uber already has in order to be financially viable.
Looking at what Wall Street analysts are saying about Uber stock, the mood is pretty bullish. Out of 35 experts, 33 of them are in favor of buying, while only two are undecided. In addition, average target price of $93.35 suggests that the stock is significantly undervalued, indicating an impressive upside potential of 44.5% from its current price.
As noted throughout the article, there are many reasons to be optimistic about Uber in 2025. The company’s fundamentals are the strongest they’ve ever been, growth is accelerating, and the outlook for the future is exceptionally bright. I see the stock as the best example of “growth at a reasonable price”, especially since concerns about the Robotaxi project seem overstated and are already built into the stock’s valuation.
For these reasons, I maintain my confident Buy rating on UBER.
