Is Uber Technologies worth the ride?

The stock is down by half since hitting highs last year but is Uber Technologies (Uber Technologies Stock Quote, Charts, News, Analysts, Financials NYSE:UBER) a good place to be parking your money right now? 

If you can look past the current bumpy period for American tech stars, then, yes, says portfolio manager Bruce Murray, who likes the long-term outlook for the ride hailing and delivery company.

“Uber is one of the stocks that we own and are down a bit on, but as the economy reopens we believe the Uber story is going to unfold over the pandemic,” said Murray, CEO of the Murray Wealth Group, who spoke on BNN Bloomberg on Monday. “They’ve made progress, such as, they signed up the the New York taxi cabs to work with Uber, so that’ll generate more income, and they’re even talking in London. England.”

Uber shares opened down sharply on Wednesday after the company released its first quarter earnings. Revenue was up 136 per cent to $6.9 billion, marking a strong contrast to the same quarter in 2021 when the world was more firmly in the grip of the COVID pandemic than so far this year. (All figures in US dollars.)

“Our results demonstrate just how much progress we’ve made navigating out of the pandemic and how the power of our platform is differentiating our business performance,” said CEO Dara Khosrowshahi in a press release. “In April, Mobility Gross Bookings exceeded 2019 levels across all regions and use cases. There’s never been a more exciting time to innovate at Uber and we’re focused on executing our strategy to grow our platform profitably.”

At the same time, Uber posted a massive $5.9 billion loss for the quarter, which was pinned on investment losses tied to its stakes in delivery company Grab, autonomous vehicle company Aurora and China ride-hailing company Didi.

The Q1 revenue of $6.9 billion beat analysts estimates at an average of $6.1 billion, while a loss of $0.18 per share excluding items was also better than the consensus loss of $0.24 per share. By segment, Uber’s Mobility business returned sharply on a year-over-year basis, showing 195 per cent growth to $2.5 billion, while Delivery was also up 44 per cent compared to 2021’s Q1 at $2.5 billion. Uber’s Freight business was up from $301 million to $1.8 billion and included the acquisition of logistics company Transplace, bought last year for $2.25 billion.

“With free cash flow approaching breakeven in Q1, we now expect to generate meaningful positive free cash flows for full-year 2022,” said CFO Nelson Chai in the press release.

Earlier this year, Uber announced a new partnership with New York City yellow cabs, an industry which was devastated by the appearance of Uber’s platform just over a decade ago. Uber said it will list yellow cabs on its app, effectively combining labour forces in a market that has been dealing with significant driver shortages. The company has already integrated taxis into its platform in other locations worldwide such as Spain, Colombia and Germany but the move to link up with New York’s cabs is both a symbolic and financial positive for Uber.

“Uber has a long history of partnering with the taxi industry to provide drivers with more ways to earn and riders with another transportation option. Our partnerships with taxis look different around the world, and we’re excited to team up with taxi software companies CMT and Curb, which will benefit taxi drivers and all New Yorkers,” said Andrew Macdonald, senior vice president of Mobility and Business Operations, in a press release.

Uber’s share price caught a bit of a bump upwards with the partnership news but the overall movement for the stock has been downwards since about April of last year. UBER traded at around $60 per share at the time — which was up by roughly 50 per cent from its IPO in 2019 — but the stock has drifted down to the $30-$35 range more recently. 

The general market movement away from tech and growth-oriented stocks has been a key theme over the past half-year and one which has likely played a role in Uber’s decline. Fellow ride-hailer Lyft is also off by about 50 per cent over the past year.

But Murray thinks Uber will move past its growing pains and pandemic hiccups, as it clearly represents where the taxi industry as a whole is headed.

“Uber, which obviously is the mechanization or computerization of the taxi business, is actually moving to where it should be, which is within the taxi business and the combining of the fleets,” Murray said. “And so, we think once the economy reopens Uber will do very, very well.”

“The stock is expensive. It’s not going to make money in 2022 and it’s going to make a little bit of money in 2023, but we think the future is very good and the company will return to being a favourite growth stock,” he said.