Shares of leading ride-hailing company Uber (NASDAQ:UBER) finished the first half of the year with a 21%+ gain. With a somewhat hefty multiple (111 times trailing P/E) and uncertainties surrounding what happens to Uber’s business once robotaxis roll out across the nation’s roads, I don’t blame investors for selling the stock. This is especially true with the chart correcting off its February highs. Still, I’m inclined to stay bullish. UBER stock may still have more room to run as ridership looks to stay healthy in the second half of the year.
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Also, Uber looks like it could be one of the biggest winners as robotaxi tech gradually rolls into new cities. Indeed, robotaxis may be viewed as an existential threat by the Uber bears, especially if a rival, like Tesla (NASDAQ:TSLA), winds up first to market with a robotaxi app that rivals Uber. Such a robotaxi app may grant Elon Musk’s company the keys to a “winner-takes-most” market environment.
For Uber, such a scenario could have the potential to introduce considerable volatility, especially if a Tesla robotaxi app bites into Uber’s dominant market share. Nonetheless, I believe this technology could enhance Uber’s services, especially through its partnership with Waymo—an Alphabet (NASDAQ:GOOGL) subsidiary—mitigating concerns about competitors like Tesla. Given Uber’s strategic advancements in autonomous driving, the company’s prospects look promising.
Tesla’s “Historical” Robotaxi Day Could Move the Needle for Uber
Whether Tesla is on the brink of a “historical [robotaxi] moment” remains the trillion-dollar question. I think Uber shareholders can breathe easily going into August 8 (the day of Tesla’s robotaxi event), as I find it highly unlikely that Tesla will announce a service that pulls it markedly ahead of Waymo. And it certainly seems improbable that any Tesla announcement would pull the rug from underneath Uber, especially since the company has a plan to advance in the age of autonomous driving.
Does that mean Tesla won’t have a surprise in store for the world come August? It’s really hard to tell. If there’s a visionary who can shock, awe, and break ground on new tech, it’s Elon Musk. But pending a massive, unforeseen acceleration in the firm’s progress on autonomous driving, I wouldn’t want to hit that sell button on UBER stock quite yet. Heck, perhaps a ground-moving robotaxi event could shine a spotlight on Uber, Waymo, and the rest of the robotaxi pack.
After all, Uber stands out as a convenient way to consolidate what could be several robotaxi services poised to go online in the coming years and decades.
Uber already has a massive user base and has done a fantastic job consolidating transportation services beyond ride-hailing over the past few years. From grocery and food delivery to mobility, logistics, commuting, and even vehicle rentals, Uber already has so much under the umbrella. A robotaxi service via Waymo would only enhance Uber’s existing business. Additionally, Waymo may not be the only big-league robotaxi partner Uber welcomes to its app.
A Smooth Growth Trajectory, Even after Rocky Q1
Undoubtedly, the early gains from Uber’s push seemed to have worked its way into the stock in the months that followed the company’s impressive fourth-quarter earnings beat. For Q4, Uber clocked in earnings per share of $0.66, ahead of the $0.17 estimate.
More recently, Uber slipped back into a quarterly loss ($0.32 loss versus the expectations of a $0.22 gain). However, with growth still on the right track, such a slight bottom-line fumble seems more of an outlier, given how much noise (legal settlements, losses from equity bets) weighed down the results.
In the first quarter, the ride-hailing giant clocked in $10.13 billion in revenue, up 15% year-over-year on a constant-currency basis. If Uber can keep sales driving higher by double digits while continuing to fire on all cylinders in terms of operating efficiencies, the road to greater earnings growth seems like it could be smooth. With such a nice trajectory for margins and sales, it’s no wonder why 30 out of 31 analysts have a Buy rating on Uber stock.
Should Uber drivers be replaced with AI sooner rather than later, perhaps the best margin booster has yet to give a lift to the stock. Of course, a tech-driven future can be difficult to read. With Waymo rolling into San Francisco more broadly last month, perhaps autonomous driving and robotaxis are becoming less of a distant pipedream and more of a profound technology (like generative AI) that we’re driving into at full speed.
Is Uber Stock a Buy, According to Analysts?
On TipRanks, UBER stock comes in as a Strong Buy. Out of 31 analyst ratings, there are 30 Buys and one Hold recommendation. The average UBER stock price target is $87.93, implying upside potential of 24%. Analyst price targets range from a low of $71.00 per share to a high of $100.00 per share.
Bottom Line
The economics of Uber’s business have improved markedly in recent years. As Tesla’s robotaxis roll out, perhaps Uber’s biggest margin gains are ahead of it. Even if the autonomous hide-hailing market sees more competition (from the likes of Tesla and others), Uber seems to be in great shape to benefit from the rise of autonomous driving tech.
