Uber Stock Looks Expensive -- or Does It?

Core Viewpoint - Uber Technologies has transitioned from a cash-burning disruptor to a profitable global platform with diverse growth engines, including mobility, food delivery, logistics, and advertising, but its stock valuation has raised questions about sustainability [1][12]. Financial Performance - Uber achieved its first annual profit in 2023, with operating income more than doubling from $1.1 billion to $2.8 billion in 2024, and free cash flow also more than doubling from $3.4 billion to $6.9 billion [3]. - In Q1 2025, Uber generated $1.2 billion in operating income on $11.5 billion of revenue, with free cash flow expanding 66% year over year to $2.3 billion, indicating a sustainable profitability trend [4]. Business Diversification - Uber has evolved from a ride-hailing operator to a diversified platform, with mobility as its core business still showing growth and solid margins [5]. - The delivery segment has become profitable and is expanding into higher-value areas like groceries and alcohol, while freight contributes to long-term logistics options [6]. - Uber is also scaling smaller businesses like Uber Ads and Uber One, leveraging its large user base of 150 million monthly active users for monetization [7]. Network Effects and Data Utilization - Uber's platform benefits from powerful network effects, where increased user participation attracts more drivers and merchants, driving transactions and enhancing customer appeal [8]. - The growing pool of first-party data allows for better targeting and higher-margin monetization across Uber's ecosystem [8]. Future Growth Opportunities - Potential growth areas include autonomous ride-hailing and delivery, as well as international expansion, which could rival or exceed the growth of Uber's core businesses [9]. Valuation Context - Uber's trailing price-to-sales (P/S) ratio is 4.6, which is not considered a bargain but is reasonable given its profitability and market opportunities, especially compared to peers like DoorDash and Lyft [10][11]. - DoorDash has a higher P/S ratio of 9.1 but with thinner margins, while Lyft trades at a steep discount with less scale and international reach [11]. Investment Implications - Uber's stock is no longer a value play or solely a growth story; it has established a track record of solid earnings and multiple growth levers [13]. - The focus for long-term investors should be on Uber's ability to execute across its segments to sustain growth and expand margins, making the current share price reasonable if successful [13].