Should I invest in Uber?

Should I invest in Uber?

Should I invest in Uber? 

I have been debating this question for months now.

I like companies that provide tangible utility. What service do they provide to the free world? How does the product or service satisfy basic human needs? Uber provides transportation and logistic services. These services will be in demand forever, so they have the utility box checked.

Next, when I consider buying a stock I want to find out which large financial institutions currently own them. I go to Yahoo Finance, type "Uber" in the search engine, then go to the "Holders" section. The familiar names I see are: Morgan Stanley, Vanguard Group, Blackrock, and JP Morgan. This is encouraging news. If Jamie Dimon is comfortable investing $1.9 Billion in Uber, maybe I should consider investing a little something something.  

But the most important test is a financial analysis. What is the health of the balance sheet? And what are the year over year trends of the income statement? Since I am already on Yahoo Finance, I go to the "Financials" section, and I can see a summary of Uber's income Statements from 2019-2022. I look at Revenue first. I want to see how much cash they are bringing in, and what are the trends.


2019: $14.15 billion.

2020: $11.14 billion. (Decline in revenue due to COVID)

2021: $17.46 billion.

2022: $31.88 billion.

Positive revenue growth over the past four years is awesome, so far so good, but it does not tell the full story. I want to know more. What is the cost to generate revenue? What are the primary revenue drivers? How much cash sits on their balance sheet? How much short term and long term debt? To answer these questions I like to examine the most recent 10-K/10-Q, found on Uber's website under the Investors section. 

In 2022, Uber's cost to generate revenue was $19.7 billion, which results in a profit margin of ~38%. Their profit margin is down from 2021 (46.4%) and 2020 (53.7), however margins greater than 20% is considered strong. 

Okay, moving on to total expenses and costs. Uber is a growth company; founded in 2009 they are still less than 15 years old. Ford Motor Company on the other hand is 120 years old, being founded in 1903. I say all of this to say I expect Uber to operate at a loss. 

Total Expenses:

2019: $22.74 billion.

2020: $16.00 billion. 

2021: $21.29 billion.

2022: $33.71 billion.

As we can see in each of the last four years total expenses were greater than total revenue. The resulting operating loss in each year, respectively: -$8.6B, -$4.86B, -$3.83B, -$1.83B. There is not a glaring pattern amongst the expenses so I would say it is something to monitor. What is encouraging is the operating loss is getting smaller in each year, which means the company may be headed towards operating at a profit soon!

Now let's quickly take a look at their most recent balance sheet (as of 03.31.23).

They report $4 billion worth of cash, $9.2 billion of current assets, and $32.45 billion of total assets. They report $8.2 billion of "goodwill" as an asset, considering this is not true cash, I would say their total assets are a bit overstated. They further report $8.68 billion of current liabilities, and $23.78 billion of total liabilities. If I remove the reported goodwill their total adjusted assets would be $24.25 billion. Remember this is a quick look; the balance sheet can be dissected in several ways. Nonetheless, I would say Uber's balance sheet is not strong but not weak either. Their total liabilities and assets are neck and neck. I would also like for their total cash balance to exceed their current liabilities, but again they are in growth mode. 

What I love about Uber is their product set. Their primary service is their Rides business of course, but they also provide a food and package delivery service, freight transportation software, rental cars, bike and scooter rentals, and a business platform that helps companies manage business travel. They are leveraging data and insights from their ride sharing platform. 

The final test is leadership. If the company does not have a strong leader I want nothing to do with them. The CEO is Dara Khosrowshahi, former CEO of Expedia Group. Dara has a strong reputation, known as "the Dad of Silicon Valley." He grew Expedia to be one of the largest online travel firms, and was one of the highest rated CEO's on Glassdoor. 

Verdict: BUY

I believe Uber has a phenomenal logistics platform that will only grow with time. They have the right CEO in place, who I believe will properly leverage the astronomical amount of logistics data they get access to everyday. 




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