(News Bulletin 247) – The title of the specialist in VTC services and food delivery was buoyed by the significant improvement in its financial results. More recently, the less-than-glamorous presentation of Tesla’s robotaxis reduced market fears about intensifying competition.

Uber has recently returned to the forefront of headlines. The specialist in VTC and grocery and meal delivery would, according to the Financial Times, have its sights set on the travel site Expedia, eyeing an acquisition of the British group to diversify its activities. Information which is not commented on by the two groups.

These rumors serve as a reminder of how much power Uber has gained in recent years. Moreover, the Financial Times highlighted that the company found itself in a strong position in terms of external growth, thanks to the jump in its stock price, displaying a market capitalization of nearly $170 billion. That is more than 37 of the 40 members of the CAC 40 (LVMH, Hermès and L’Oréal are still ahead). This could allow the company to buy back a target with an equity component at a lower cost.

The price of Uber Technologies on Wall Street has in fact catapulted over the last twelve months, with an increase of almost 90%

.

>> Access our exclusive graphic analyses, and gain insight into the Trading Portfolio

Going from big losses to big profits

Symbol of this great rise, the group led by Dara Khosrowshahi entered the S&P 500 in December 2023, the major benchmark index for Wall Street (and therefore the entire world). This inclusion may have led to buying flows before or after the entry date, with ETF (index fund) managers having to acquire the security to continue to replicate the performance of the index. Although this effect is not so certain, as XTB pointed out at the time.

The main source of Uber Technologies’ progress on the stock market is quite simply linked to operations and the improvement of its financial performance. From a loss of $9 billion in 2022, the company went to a profit of nearly $2 billion in 2023, the first fiscal year in the green since its IPO in 2019.

Beyond profit, other indicators are perhaps more relevant. Adjusted gross operating income jumped 137% year-on-year and, above all, free cash flow, essential for reducing debt, investing or returning cash to shareholders, was multiplied by more than eight to $3.36 billion. .

These good financial performances were not limited to the 2023 financial year and the group continued its good execution.

In the second quarter of 2024, reservations increased by 19% year-on-year, revenues by 16%, profits by 158% and cash generation by 51%. In the wake of these results, the stock jumped more than 27% over the ten sessions that followed. Both these results and the forecasts for the third quarter had exceeded expectations, noted Bank of America.

A winning diversification

While investors were concerned about the complicated macroeconomic environment, with a deterioration in the US economy between spring and summer, “we were impressed that the company continued to execute its business model well, with strong year-over-year booking growth and solid profitability,” Morningstar noted.

“Uber indicated that across all income cohorts, there had been no evidence of weakness from consumers. Additionally, the company highlighted that the business has counter-cyclical aspects. In case of macroeconomic weakness “, the supply of drivers improves, which lowers prices for consumers, thus creating a more affordable product”, reported Wedbush.

This solid execution led, in mid-August, the S&P agency to raise the company’s credit rating to “BBB-“, the last notch in the “investment grade” category, in which the highest rated companies appear. Fitch, for its part, assigned a rating to the group for the first time a few days later, also in this category.

Fitch praised the company’s diversification. “Uber is expanding beyond ride-sharing to encompass a broader range of mobility services” which includes beyond ride-hailing services and meal delivery “newer offerings like grocery delivery, car rental and other physical goods that can benefit from delivery services,” the agency emphasized. “Fitch believes this product portfolio expansion could solidify Uber’s position as the provider of choice for mobility services beyond ride-sharing, differentiating it from competitors with limited product offerings.” , she argued.

Fitch also liked the company’s focus on accelerating its growth without hurting its profitability, which allowed it to go from $1 billion in cash burn in 2021 to more than $5 billion in cash flow. expected this year. The agency also stressed that its advertising activity now constituted a “profit engine” and that the regulatory problems on its activities had essentially been “resolved”.

Tesla disappoints, Uber smiles

However, a closer look at the stock price shows that Uber’s 2024 on the stock market included a less glorious phase. The stock is progressing, certainly by 27% over the whole year, but it has experienced a downturn, moving somewhat in a “U” shape since January 1st. At the beginning of August, its price had even gone into the red for the whole year.

Beyond macroeconomic concerns, another threat loomed: the fear that Tesla could ultimately disrupt the business model of Uber (and other companies in its sector, such as Lyft) thanks to its advance in the vehicle autonomous and its robotaxis. The company thus suffered from fears “that automobile transport companies like Waymo or Tesla could weaken its dominant position in the carpooling sector,” Morningstar judged in August.

Tesla’s “robotaxi day”, on October 10, was then followed like milk on fire by the market. But in the end, the event disappointed. “It’s mostly a show-off, with little substance,” said Colin Langan of Wells Fargo. “The event succeeded in generating enthusiasm but offered little substance,” continued the analyst quoted by Barron’s.

Tesla lost 8.8% in the session following this presentation. Uber Technologies for its part gained… 10.8%. “The twenty-minute Robotaxi event concludes six months of concern over Uber,” summarized Bank of America. The bank emphasized that the absence of announcements on the timetable or on “a business model” for the deployment of a carpooling application constituted a positive element for Uber. The establishment judged that the event “did not live up to the fears” of the market.

A pragmatic approach in autonomous vehicles

This does not mean that Uber is not positioning itself in autonomous driving. But the company adopts a pragmatic approach appreciated by analysts, by increasing partnerships with the major players in this form of mobility. Since June, the group has established at least seven partnerships of this type, noted Bloomberg, including Waymo (Alphabet) and Cruise (General Motors). With the idea of ​​ultimately offering a hybrid model between cars with and without drivers.

Moreover, the general director, Dara Khosrowshahi, was cautious in October to Bloomberg, stressing that the technology remained evanescent, that the costs were too high and that the regulators were scrupulous.

“Safety is the top priority,” he said. “We will then start, I would say in the next three to seven years, to focus on the economy,” he added.

This does not prevent analysts from being confident in the group’s positioning in autonomous vehicles. For Morningstar, the group will be “one of the winners in the long term”. “We expect that increased competition between Waymo and Tesla and the 30 other autonomous vehicle competitors in California will benefit Uber, given its position as a partner to several autonomous vehicle providers,” judge for his part Bank of America.