Uber’s Strong Earnings Signal Long-Term Potential, Analysts Say Stock Drop Is Temporary

Uber continues to show robust growth, with analysts viewing the recent dip in stock prices as a buying opportunity. Initially launched as a global ride-hailing company, Uber has since diversified into three main areas: ride-sharing, food delivery, and freight transportation.

The company’s revenue is primarily driven by its ride-sharing platform, which accounts for 57% of total revenue. This is followed by 31% from food delivery and 12% from freight. To date, the ride-sharing segment remains the main contributor to operating profits.

Hana Securities reported a 20% year-over-year increase in Uber’s total Gross Bookings for Q3 2024, excluding currency effects. The ride-sharing platform’s transaction volume surged by 24%, sustaining strong momentum for the second consecutive quarter.

This growth is attributed to increases in both active users and usage frequency. Analysts also project at least a 20% growth rate for Q4.

Analyst Ahn Do Hyun highlighted that ride-sharing and food delivery commission rates are trending upward. He anticipates steady revenue and operating profit growth despite rising costs, including insurance.

Uber’s operating profit turned positive in Q2 2023, with profitability improving in subsequent quarters, driving a sharp rise in stock prices. However, following the Q3 earnings announcement, the stock price declined due to a slowdown in transaction volume growth compared to Q2.

Concerns over increased competition from expanding robotaxi services have weighed on Uber’s stock price. However, Analyst Ahn does not foresee the rapid expansion of robotaxi services in urban areas in the near term.

Moreover, Uber’s numerous partnerships with robotaxi and autonomous driving companies are expected to mitigate any significant impact on its corporate value.

Analysts suggest that Uber’s continued expansion into new markets and innovative services, such as robotaxis and advertising, could act as fresh growth catalysts.

The company takes a conservative approach to mergers and acquisitions and announces plans for stock buybacks and retirements over the coming quarters, leveraging its excess cash flow.

Ahn believes that Uber’s strong profitability and high transaction volume growth make further stock price declines unlikely. The stock trades at a 12-month forward P/E ratio of 22, suggesting substantial growth potential.