To The Moon

$Uber(UBER)$

Bill Ackman just announced on X that he has purchased 30.3 million shares of Uber, currently valued at over $2.3 billion. This acquisition potentially makes Uber his largest position, surpassing Brookfield and Google.

Uber’s stock has been a hot topic recently. Bears argue that autonomous vehicles from companies like Waymo and Tesla could disrupt its business, while bulls believe Uber’s extensive network is a key asset that AV companies will want access to.

I'll break down his investment thesis, review Uber’s latest earnings, and discuss a key recent development that strengthens the bullish case. I previously had a more cautious stance on Uber, but this shift is making me reconsider. In the second half of the article, I'll explain why I'm becoming more optimistic, particularly due to a major technological advancement that benefits Uber’s platform.

Ackman has disclosed that he owns approximately 30 million shares of Uber, purchased at around $75 per share—an investment of over $2 billion, representing roughly a 1% stake in the company. He was an early investor in Uber, first introduced to the app by actor Edward Norton. He acknowledges that Uber suffered from poor management in the past but believes its current CEO, who took over in 2017, has done an outstanding job. Ackman describes Uber as one of the best-managed, highest-quality businesses in the world and argues that it still trades at a significant discount to its intrinsic value.

Earning Overview

The company recently reported its Q4 2024 earnings, initially facing a negative market reaction, but the stock is now rebounding strongly—especially following the news of Ackman’s investment. In its report, Uber also addressed concerns surrounding autonomous vehicles, which we will cover in this analysis.

Today, we’ll take a closer look at Uber’s Q4 earnings and explore why Bill Ackman might be investing in the company.

To start, Uber’s CEO stated that the company ended 2024 with its strongest quarter ever, with growth accelerating across key metrics such as MAPCs (Monthly Active Platform Consumers), trips, and gross bookings. Record demand in both mobility and delivery exceeded guidance, and the company outperformed its three-year outlook on gross bookings, adjusted EBITDA, and free cash flow. The CEO also emphasized that despite strong fundamentals, Uber remains undervalued and plans to actively repurchase shares.

Now, let’s break down Uber’s financials:

• Gross bookings: Up 18% year-over-year (YoY) to $44.2 billion (or 21% on a constant currency basis).

• Delivery gross bookings: Reached $20.1 billion, up 18% YoY.

• Trips: Increased 18% YoY to 3.1 billion, averaging 33 million trips per day.

• Revenue: Grew 20% YoY to $12 billion (21% on a constant currency basis).

• Mobility & delivery revenue: Increased 23% YoY to $10.7 billion.

• Income from operations: Reached $770 million, up $118 million YoY.

• Adjusted EBITDA: Grew 44% YoY to $1.8 billion.

• Net cash from operating activities: $1.8 billion.

• Free cash flow: $1.7 billion.

Uber ended 2024 with an exceptional quarter, showcasing strong revenue growth (+20%), increased bookings (+18%), and a significant rise in adjusted EBITDA (+44%). Free cash flow more than doubled, reinforcing Uber’s position as a cash-generating powerhouse.

Uber Management had set ambitious targets, aiming for mid-to-high teen percentage growth in gross bookings, a 30–40% increase in adjusted EBITDA, and free cash flow conversion of over 90%. They not only met these targets but exceeded them—delivering 21% growth in gross bookings, 60% growth in adjusted EBITDA, and a 106% free cash flow conversion rate. Investors appreciate when a company sets clear expectations and then outperforms them.

A closer look at Uber’s key performance indicators (KPIs) reveals a healthy business. User numbers and trip frequency have both increased, contributing to higher overall trip volume. Gross bookings for the fourth quarter rose around 20%, or 21% on a currency-adjusted basis. Mobility bookings—rides from point A to point B—generated approximately $23 billion, with Uber keeping roughly 30 cents of every dollar as revenue.

Uber’s delivery segment, which includes food, groceries, and other goods, also showed strong performance, growing gross bookings by 18%. While delivery is a lower-margin business compared to mobility, Uber has steadily improved its profitability in this segment.

Freight, however, remains a weaker area, showing zero growth and continuing losses. The future of this division remains uncertain—it could be divested or restructured.

Overall, Uber’s financials are strengthening, with adjusted EBITDA and free cash flow growing at impressive rates. Free cash flow reached $7 billion last year, a key metric that investors—including Ackman—find attractive.

At a $160–170 billion market cap and a share price around $75, Uber is trading at a low-20s multiple of free cash flow. Given its potential for sustained double-digit annual growth, this valuation appears reasonable—especially when compared to risk-free Treasury bonds yielding 4–5%. If Uber can maintain 10%+ growth, it offers a compelling alternative to bonds, which lack growth potential.

Key Business Highlights

Autonomous Vehicle (AV) Partnerships:Launched autonomous ride-hailing services in Abu Dhabi, marking Uber’s first AV deployment outside the U.S.Began delivering Uber Eats orders via autonomous sidewalk robots in Austin, Dallas, and Osaka through partnerships with Serve Robotics and Cartken.Formed a joint initiative with Nvidia to develop AI-powered autonomous driving solutions.

Uber’s strategy appears to be integrating AV technology rather than competing with it, allowing AV companies to leverage Uber’s platform and customer base.

Taxi Expansion:Partnered with a major taxi dispatch provider in Japan, adding up to 20,000 taxis to the Uber platform.Demand in Japan remains strong, driven by both domestic users and international travelers.

Uber’s app is evolving into a comprehensive mobility platform, attracting not just AV companies but also traditional taxi services due to its vast user base (170 million global users).

Financial Strategy & Capital Allocation

Uber is also improving its cost structure:

• Stock-based compensation: Decreased from $469 million in Q4 2023 to $419 million in Q4 2024, signaling a commitment to reducing dilution.

• Operating cash flow: More than doubled YoY, reaching $7.14 billion for 2024.

• Capital expenditures: Remained low at $44 million for Q4 and $242 million for the full year, highlighting Uber’s asset-light, software-like business model.

This combination of increasing cash flow and controlled spending underscores Uber’s ability to scale profitably.

Uber’s Perspective on AV Competition

Uber remains optimistic about its role in the AV future, stating that full commercialization of autonomous vehicles will take longer than expected. The company believes it will be an essential distribution partner for AV firms, similar to how it integrates traditional taxis into its network.

The CEO noted that early data from Phoenix (where Uber partners with Waymo) shows higher utilization rates for AVs when integrated into Uber’s platform versus operating independently. This suggests that even leading AV companies benefit from Uber’s extensive customer base and logistics network.

Uber’s Valuation & Investment Case

• Price-to-free cash flow (P/FCF): ~21.4x, implying a free cash flow yield of ~4.7%.

• Growth outlook: 20% annual revenue growth and 30% free cash flow growth projected for 2025 and 2026.

A 21x free cash flow multiple for a company growing at this pace appears reasonable. Bill Ackman’s investment aligns with his strategy of backing high-growth, cash-generating businesses with strong competitive advantages.

Considering Uber’s strong financials, strategic positioning, and growing market opportunities, the primary concern that previously made me cautious—the threat of Waymo and Tesla monopolizing autonomous ride-hailing—now seems less pressing. With multiple AI-driven autonomous solutions emerging, Uber is well-positioned to serve as the platform of choice, benefiting from both human and AI-driven transportation.

Conclusion

Uber has transitioned into a highly profitable, free cash flow-generating business while continuing to expand its mobility ecosystem. The company's network effect, partnerships with AV firms, and disciplined financial strategy position it well for long-term growth.

Bill Ackman’s significant investment signals strong confidence in Uber’s future, and given its valuation, cash flow strength, and strategic positioning, his bet on Uber seems well-founded.

@Daily_Discussion @TigerPM @TigerObserver @Tiger_comments @TigerClub

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.