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Argus Research launches coverage of Uber Technologies (UBER)

Joanna Kong
Yahoo Finance Premium

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  • Uber is a global market-share leader in app-based ride-sharing and ride-hailing, and competes in the food delivery, micro-mobility (scooter and bike rentals), and freight industries. The company is also developing and testing an on-demand staffing business.

  • These markets are all highly competitive, and all of the players in these industries are willing to sacrifice short-term profitability to preserve and grow market share. In ride-hailing and adjacent segments, we believe market share growth for Uber will come at the price of massive losses in the short and medium-term. Although Uber is not close to profitability, even on a non-GAAP basis, the company has managed to control its cash burn, although debt has also grown rapidly.

  • Uber has a dominant position among competitors in key markets served, but it has relatively tiny penetration in total consumer mobility. Uber commands up to half of ride-sharing bookings in North America, Latin America, parts of Europe, India, and Oceana. Yet based on total miles driven, Uber’s share of total personal mobility is less than 1% in every major region in which it operates. Uber believes the global personal mobility TAM is $5.7 trillion annually, including $2.5 trillion within its current SAM (serviceable addressable market), and indicating considerably room for growth.

  • We do not expect UBER to be profitable, or even cash-flow positive, for multiple years to come. Based primarily on price-to-sales and price-to-book value multiples, our comparable valuation range for UBER is in the high $20s to low $30s, near to modestly below the current price. We will await a more favorable entry point before considering an intermediate-term BUY rating.

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