Why We Like Uber

I'm quite heavily invested in Uber and was a keen promoter of its shares when they listed on the NYSE at $42 in May 2019. As a result, another 60 Vestact clients also own them.

Since we bought in, the Uber share price has traded as low as $28.39 and as high as $64.05 per share. It's at $50.79 now. So it's been a bit of a rollercoaster ride.

First some background information. Uber was founded in 2009 in San Francisco and now has operations in over 900 metropolitan areas worldwide. It has about 100 million active customers.

This company is synonymous with its service, so people say "will you Uber?" when they are asking how you will get someplace. I love their business model, with dynamic pricing, customer transparency on a mobile phone and a brilliant payment system. Car ownership is expensive and inefficient, and public transport is often inflexible and uncomfortable. Uber fills that gap.

Uber is one of the largest firms in the gig economy. It wants to treat its drivers as contractors, not employees, and has mostly been successful at that. The UK is a notable exception. In years to come they may provide their services through driverless cars and drones.

I also like the company leadership. Dara Khosrowshahi (former head of Expedia) has been the CEO since 2017. He replaced the founder, a rather mercurial person called Travis Kalanick. That was a good thing.

I like their corporate transaction discipline. They tend to sell up in countries where they are sub-scale, often swapping their business for a minority stake in the dominant player (like they did with Didi, Yandex, Grab and Zomato). They go hard where they are the leader, and are not afraid to make big losses while building up the service.

Speaking of losses, Uber has racked up some giant ones. In 2020 they had gross bookings of over $58 billion, and recorded revenue of $11.1 billion but made losses for the year of $6.8 billion. But those losses are narrowing.

Of course 2020 was a rotten year. The Covid-19 Global pandemic lockdowns temporarily crushed their ride-hailing business and they had to lay off close to 25% of their global workforce (shedding about 6 500 employees).

On the plus side, the pandemic kick-started their Uber Eats food and grocery delivery business. To bulk up that operation, Uber acquired Postmates for $2.65 billion in December 2020. Two months later, they announced the purchase of alcohol delivery service Drizly for $1.1 billion in cash and stock.

As the number of vaccinated persons rises, and the memory of Covid-19 recedes, their ride-hailing business will bounce back. I'd expect them to become profitable within the next 3 years. In summary, I still like these shares and recommend Uber as a side holding in your portfolio.