Uber Stock Looks Expensive — or Does It?

by

Uber Technologies (UBER) has traveled a significant distance from its initial days as a financially draining innovator in the taxi sector. Nowadays, it stands as a lucrative worldwide platform, boasting numerous avenues for expansion that encompass transportation, food delivery, logistics, and advertising.

Over the last two years, I’ve been captivated by this stock as its share price has more than doubled. However, now that its trailing P/S ratio hovers around 4.6, it makes me wonder if its incredible growth may have outpaced its underlying fundamentals. Is it possible that the stock has moved too far ahead of its solid financials? This is a question worth pondering for any discerning investor.

While the valuation looks high at first glance, the underlying business might justify the premium.

Profitability is no longer just a promise

For years, Uber followed a growth-at-all-costs strategy. That’s no longer the case.

Following a successful first annual profit achieved in 2023, Uber saw an increase in both revenue and earnings the subsequent year, 2024. The operating income for that year surged significantly, increasing from $1.1 billion to a notable $2.8 billion, and free cash flow followed suit, nearly doubling from $3.4 billion to a substantial $6.9 billion.

In the first quarter of 2025, Uber recorded an impressive run of profitability, earning approximately $1.2 billion in operating income from a total revenue of $11.5 billion. Remarkably, the company’s free cash flow experienced a significant increase of 66%, amounting to a substantial $2.3 billion compared to the previous year.

I’m thrilled to share that this situation clearly proves it’s not just a fleeting phase of profitability for our company. We’ve made a profound shift in our business model and cost structure, and the fruits of these changes are evident in our growth and improved margins!

Loading widget...

A multi-engine platform

Initially known primarily for its ride-sharing services, Uber has transformed significantly over the past few years into a multifaceted platform, offering various avenues for growth and expansion.

The company’s primary focus remains mobility, which is thriving, providing good profits, and maintaining solid margins due to its dominant position in many markets. Moreover, delivery, our second major source of income, has become profitable and is now broadening into premium sectors such as groceries and alcohol. Furthermore, although freight generates a relatively small revenue and almost breaks even, it offers long-term flexibility for the company in logistics and business transportation.

Apart from its primary offerings, Uber has stealthily developed strategies for monetization, such as Uber Ads (for advertising) and Uber One, their subscription service for members. This diverse range of services sets Uber apart from competitors focusing only on delivery or ride-sharing, and it boasts a massive user base of 150 million monthly active users, along with a wide network of merchants, to tap into for revenue generation.

On Uber’s platform, a self-reinforcing cycle occurs as users sign up in greater numbers. This influx draws additional drivers and merchants to the service, increasing transactions. The increased activity makes it more appealing to customers, creating a virtuous circle that propels growth. Moreover, this growth generates an expanding reservoir of first-hand data which Uber can utilize to enhance services like Uber Ads. This leads to improved targeting and higher-profit monetization opportunities throughout the entire ecosystem.

Additionally, it’s worth noting that there are other promising ventures in sectors such as autonomous taxi services and delivery, or global expansion. Though these industries are currently developing, they show immense growth prospects that might even surpass the scale of Uber’s primary operations.

Putting Uber’s valuation into context

Uber currently trades at roughly four and a half times its sales, which is far from being considered a bargain. Although it’s not yet near the peak multiple of 10.1 it reached during the pandemic in 2021, it has significantly increased from its lowest point of 1.6, nearly tripling since mid-2022.

Today, Uber’s valuation sits close to midway between the valuations of peers DoorDash and Lyft.

Company Trailing P/S Ratio Profitability
Uber 4.6 Profitable
DoorDash 9.1 Marginally profitable
Lyft 1.0 Breakeven

In simpler terms, DoorDash has a higher price tag due to its rapid expansion potential, but it has slimmer profit margins and a less varied business model compared to what Uber offers. On the other hand, Lyft is currently undervalued, yet it doesn’t have the same level of scale or global reach as Uber, nor does it enjoy the same opportunities for cross-selling that make Uber more attractive.

Indeed, I find myself observing that Uber’s valuation isn’t exactly a bargain, yet it doesn’t seem unreasonable either. This assessment stems from the company’s increasing profitability and the vast market prospects it presents.

What it means for investors

Uber stock may no longer be a value play, but it’s also no longer just a growth story stock.

Today, it boasts a proven history of strong earnings, numerous opportunities for expansion, and a variety of potential paths forward.

For those who invest for a longer period, it’s not just about whether Uber appears affordable based on a single statistical measure. The real concern is if the company consistently delivers across various business areas to maintain growth and increase profitability. If they manage this effectively, their current stock price could be considered quite fair.

Read More

2025-07-21 01:51