In June 2023, I started buying shares in rideshare powerhouse Uber (NYSE: UBER). At the time, the US-listed growth stock was trading for around $45.
Fast forward to today and Uber’s share price is sitting at $96, so I’ve more than doubled my initial investment. I still see enormous potential, however, so I won’t be selling my shares any time soon.
More than a rideshare platform
Uber’s market cap has risen to around $200bn lately, meaning that it’s a relatively large company these days. That valuation is nearly on par with the largest company in the FTSE 100 index, AstraZeneca, which currently has a market cap of about $220bn.
I believe Uber has the potential to get much bigger in the years ahead, however. Because this company is extremely innovative.
Just look at how the company is getting involved in the robotaxi scene. Today, Uber has partnerships with more than 10 different self-driving car companies including Waymo, May Mobility, and Wayve (which is planning to launch in the UK soon). This means that it’s well placed to capitalise on the robotaxi revolution no matter who dominates it. I’ll point out that I recently jumped in a Waymo self-driving taxi via the Uber app in the US and it was a very smooth experience.
Alternatively, look at the level of innovation in the company’s food delivery segment (Uber Eats). Here, the company has teamed up with robotics companies like Avride and Serve Robotics to deliver food to US customers via small robotic devices. Using robots to deliver food can offer multiple benefits. These include lower labour costs, less pollution, and enhanced safety and hygiene.
Potential for growth
When you consider that Uber is a well-known brand (with near monopolies in many of the markets it operates in), that it now generates revenues from digital advertising, and that it also has a subscription service (with more than 30m members), the investment case looks pretty exciting. In my view, it’s highly likely that revenue and earnings will continue rising.
A reasonable valuation
Now, after its rise over the last two years, the stock is not as cheap as it was. However, I don’t see today’s valuation as a deal breaker. Currently, the forward-looking price-to-earnings (P/E) ratio is about 33, falling to 27 using next year’s earnings forecast. That latter multiple isn’t high for a high-quality technology company.
Worth a look?
Of course, there are plenty of risks to consider with this stock. Competition from Tesla in the robotaxi space is one. New regulations that negatively impact the business are another. I’ll point out here that the stock can be quite volatile at times and bad news can send it down sharply.
Taking a three-to-five year view, however, I see significant investment potential. I think the growth stock is worth considering today.
