David vs Goliath

Hi everyone,

We just published our first premium stock analysis report on UBER.

This is the type of report typically reserved for clients of investment banks, high-net-worth clients, hedge funds, and mutual funds. We’re publishing a report every month for $14.95! Hardly seems fair…

Our 30+ page report contains:

• A breakdown of the business model, industry, and the market they operate in;

• Growth catalysts and strategies;

• The current valuation relative to the market;

• A complete financial model (including a DCF and reverse DCF analysis) found immediately beyond the paywall and more…

We have provided a sneak peek for you below ⬇️

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Valuation and Uber model

From the start of 2021, Uber has retraced ~60% from its highs and is down 41% from its IPO price. The retracement can be explained by various factors: Uber earnings misses; investor shift toward profitability as inflation increases; and rising interest rates and Fed’s quantitative tightening. 

With a market capitalization of $48.5 billion and an enterprise value (“EV”) of $52.8 billion, Uber is currently trading at a TTM Price to Sales (“P/S”) of 2.1x and a TTM EV/Revenue of 2.5x. Based on forward estimates, Uber is trading at a NTM EV/Revenue of 1.6x – the lowest valuation it has seen since the March 2020 flash crash. Historically, Uber has traded at an NTM EV/Revenue of 3.0x, indicating ~100% upside if multiples expand again.

Backstory: David vs Goliath.

Before we dive into Uber’s business model and what they do, it’s always great to know the history of any company. Uber means “to a great or extreme degree”, and I think that summarizes the attitude of the company regarding everything they try to achieve. It was a snowy evening in Paris in 2008 where Travis Kalanick and Garrett Camp, the Co-Founders of Uber, were struggling to get a taxi. Whilst a similar idea had been brewing inside of Camp’s mind for a few months, this event triggered a jam session between the two, reportedly at the top of the Eiffel Tower, where they came up with the idea for UberCab.com. With the tag line “Everyone’s private driver”, UberCab.com was a high-end ride-hailing platform that allowed users to book limousines through their website. They started off launching the product in San Francisco, eventually moving into the more lucrative market of New York after changing their name to Uber.

At this point, Uber was growing significantly fast and disrupting the taxi industry like nothing they had seen before. The term ‘disruption’ is over-used today by your high-flying technology start-ups that seem to raise an extra few million for every time they have ‘disruption’ in their pitch deck. But this, this was real disruption. Kalanick was facing strong backlash from government regulators and the taxi lobbyists, but he did what he does best, ignored them and moved on. Uber had a vision to deal with regulations – to become so entrenched in the way society operates that local governments will face significant backlash if they attempt to remove them. This successful achievement is what shifted the narrative from “David vs Goliath” to “David is now Goliath”.

In June 2012, a company called Lyft was founded. Through a pivotal modification to Uber’s business model, Lyft instead used amateur drivers to provide ride-hailing services with a focus on the low to middle-end market, as opposed to Uber’s focus purely on high-end, limousine ride-hailing. Kalanick attempted to quash Lyft by leveraging his network with regulators, but at that point, Lyft was far too entrenched in the transportation mechanisms of society (sound familiar?). Uber was quick to identify that the amateur ride-hailing market was much larger and easier to penetrate and launched their own product called UberX, and as we all know, the rest is history…

Democratizing Movement

Founded in 2009 during the height of the Global Financial Crisis, Uber now operates across 10,500 cities in 72 different countries. They are the largest on-demand ride-hailing provider in the world (excluding China) and have continued to innovate over the years to expand into new verticals. Uber started off by being at the intersection of the smartphone, technology, and the automobile industry. They had the vision to help customers get from point A to B in the most affordable, dependable, and convenient way possible. The key word here is “had”. Uber has since grown past those complacent goals, and now has a dream to democratize logistics, transportation, and employment. Their vision is to now help people get anywhere they want, get anything they want, and earn in any way they want – and do this all by connecting the physical and digital world through their tech infrastructure.