To The Moon

$Uber(UBER)$ $NVIDIA(NVDA)$

With the S&P 500 rising significantly over the past year, finding exceptional opportunities in the market, especially among top-tier companies trading at a discount, has become increasingly challenging. However, I have discovered an outstanding stock that is currently undervalued and widely misunderstood. This stock is Uber, which has only increased by 6% over the last year.

Uber is often misunderstood and polarizing among investors, particularly Tesla shareholders due to the autonomous vehicle debate. Despite this, Uber's business model is poised to benefit from these developments rather than be harmed by them.

Back in 2018, Uber's IPO was highly anticipated, but the company was losing money. Fast forward to today, and Uber has undergone a remarkable transformation. In 2020, they were losing $3.3 billion, but now they are generating $7.7 billion in positive free cash flow. The company has seen rapid growth in various metrics, including 161 million monthly users and a 17% year-on-year increase in trips. Gross bookings are around $40 billion per quarter, translating to over $160 billion annually.

Revenue & Growth

Uber's revenue growth has been impressive, with a 22% year-on-year increase, and adjusted EBITDA up by 55%. Despite these strong fundamentals, Uber's stock has only risen by about 6%, largely due to concerns over autonomous vehicles, which I believe are overblown.

Uber also has significant equity investments in companies like Grab, Didi, Aurora, and Joby Aviation, which add substantial value. Additionally, the Uber One program has seen a 70% year-on-year increase in membership, now boasting over 25 million members.

The company's expansion into various sectors, including grocery deliveries and partnerships like the one with Home Depot, showcases its potential to become a super app. Uber's experience and ecosystem make it an attractive partner for autonomous vehicle companies, which will likely benefit Uber rather than compete with it.

If you listen to the last conference call, the COO mentioned that they own Move, holding a majority stake and five or six board seats, effectively controlling the company. Move is just one of the many companies Uber owns, so they are still very much aligned with Uber.

The benefit I want to highlight is that all these autonomous vehicle companies are partnering with Uber, not Lyft. If anyone is going to be impacted, it will be Lyft, with Uber taking market share from them. Despite this, people are selling Uber stock because they believe Tesla will dominate the autonomous vehicle market.

Uber has also made some strategic investments, including stakes in companies like Grab, the Uber equivalent in Southeast Asia, and Didi, China’s dominant ride-sharing app. Plus, they’re involved in autonomous trucks with Aurora, and even in the air taxi space with Joby Aviation. These investments, along with Uber’s strong cash position, create a well-rounded portfolio.

But that’s not all. Uber is expanding into a "super app" model, which goes beyond ride-sharing to include food delivery, groceries, and even pet food. Uber One, their subscription service, has grown by 70% year over year, with 25 million members. Uber is continuing to grow its customer base and has a massive opportunity to cross-sell its services, especially when you consider the $160 billion flowing through its platform every year.

One of the latest partnerships Uber has announced is with Home Depot. It may seem unusual at first—Uber Eats and home improvement—but the logic is simple. You can now have items like paint or tools delivered directly to a job site. It’s part of Uber’s strategy to expand its delivery business beyond food and into broader services.

In addition, Uber’s been working on its relationship with autonomous vehicle companies. They’ve partnered with companies like WeRide, which plans to launch an autonomous ride service in Abu Dhabi through the Uber app. This is a big deal because it gives those companies access to Uber’s massive user base, and they don’t need to build their own platform.

This belief is unfounded. Tesla will not have 100% market share and may not even partner with Uber, opting for their own app instead. However, this won't be a significant challenge in the near term, as it will take years for Tesla to roll out enough cars to match Uber's low average wait times.

Uber Partnership Strategy

Recently, Uber partnered with NVIDIA to accelerate autonomous mobility. Millions of trips occur daily on Uber, providing a vast data source that companies can pair with NVIDIA's platform to build stronger AI models. While the details of this partnership are still emerging, it's clear that Uber's data is highly valuable.

Uber’s partnership with Inia is another example of how the company is positioning itself in the future of autonomous mobility. Uber will share its data with Inia’s platform, potentially creating a valuable revenue stream through royalties or other arrangements. Even if autonomous vehicles take longer to fully roll out, Uber’s ecosystem will continue to thrive.

I find it hard to believe that Uber’s stock is only trading at 20 times free cash flow, especially with its growth potential. Analysts expect Uber’s cash flow to grow from $6.5 billion to $12.6 billion by 2028, and personally, I think it could grow even faster. Given its market cap and the fact that Uber is buying back shares, I see a significant upside. Even just a change in sentiment around autonomous vehicles could result in a 35% gain for the stock this year.

Conclusion

Uber is a bet on all these futuristic technologies. You don't need to pick individual winners; Uber is the platform that will host them all. It's surprising that Uber's stock is trading at 20 times cash flow, given its business model and user base. Analysts expect Uber's cash flow to grow significantly, and I believe the stock has substantial upside potential.

In summary, Uber's stock is trading at 20 times cash flow, which seems undervalued given its growth potential and strategic investments. Analysts expect Uber's cash flow to grow significantly, and I believe the stock has substantial upside potential, especially if market sentiment shifts positively.

Disclaimer: I want to make it clear that I am not a financial advisor, and nothing I say is intended to be a recommendation to buy or sell any financial instrument. Additionally, it's important to remember that there are no guarantees or certainties in trading or investing, and you should never invest money that you can't afford to lose.

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