Uber stock price forecast: is it too late to buy?

Uber Technologies (UBER) stock price went parabolic last week, soaring to a record high of $86 as investors focused on Tesla’s robotaxi event. It has been one of the best-performing companies this year as its stock has jumped by over 40%. This rally has brought its market cap to over $181 billion.

Tesla’s robotaxi event

The most recent catalyst for the Uber share price was Thursday’s Tesla event in which the company showcased its full self-driving capabilities. 

Most analysts believe that the event underwhelmed expectations, which explains why Tesla shares plunged hard on Friday.

For a long time, some analysts have warned that Tesla Robotaxi was a major threat for a company like Uber.

Besides, anyone will now be able to convert their Tesla vehicles into taxis. For example, a person with an 8 to 5 job will drive his Tesla to work, and then deploy it into the taxi business, where it will ferry customers.

Another example is where a Tesla car owner goes for a vacation. Instead of his car staying in the garage, it is deployed to the taxi business. 

To a large extent, this business makes sense to many people. For example, in New York, the average Uber driver in New York makes between $15.7 and $22 a hour. Assuming the mid-point at $18.85, it means that a Tesla owner would make $100 if he added it to the taxi ecosystem.

However, analysts believe that the situation is more difficult than what Elon Musk promised. For one, it will likely take longer to get these robotaxi approvals in most cities.

Therefore, Uber’s stock surge was a sign that investors anticipate the business to continue thriving in the long term. Also, Uber has a large international business that will continue doing well over time.

Uber’s growth has accelerated

Uber has been one of the most disruptive companies globally. It introduced the concept of ride hailing that has changed how people travel.

At the same time, it expanded to other industries like food and grocery delivery, which has gained substantial market share.

Uber has also won its battle against competitors. For example, it sold its Southeast Asian operations to Grab, and then took a sizable share of its business. 

Uber’s annual revenues have soared from over $13 billion in 2019 to over $37 billion in 2023. Analysts believe that this trend will continue in the coming years as demand for mobility increases. 

It has also started to focus on profitability by reducing its large discounts that it offered a few years ago. 

Uber’s monthly active platform users has continued growing even as competition in the industry has remained high. It had over 156 million customers in the last quarter, a big increase from 137 million in the same period last year. Monthly trips have also surged in the past few years.

The most recent financial results showed that Uber’s revenue increased from $9.23 billion to over $10.7 billion. Its free cash flow has risen from over $1.14 billion to $1.72 billion, while its net income rose to $1.02 billion.

Uber’s growth to continue

The next catalyst for the Uber stock price will be its coming earnings on October 31st. Analysts expect these numbers to show that its revenue will be $10.97 billion, a 18% increase from the same period last year.

Revenues in the final quarter of the year will be $11.58 billion, bringing its annual figure to $43 billion. Uber will then cross the $50 billion revenue figure in the next financial year. 

Still, there are concerns about Uber’s valuation, which most analysts believe has become highly stretched. 

Uber has a forward price-to-sales ratio of 4.5, higher than the sector median of 1.51. This means that if you bought the company today for $181 billion, it will take you four years to get recover your funds in terms of revenues. 

Worse, Uber hads a forward price-to-earnings ratio of 40, higher than the sector median of 20.75. As such, assuming no more growth, it means that it will take 40 years to recover your funds in terms of profits. Uber is more expensive than companies like Nvidia and Microsoft.

Uber stock price analysis

Uber chart by TradingView

The weekly chart shows that the Uber shares have been in a strong bull run in the past few months. It crossed the important resistance point at $82.12 last week. Moving above that level was important as it invalidated the double-top pattern that was forming. In most cases, this is one of the most popular reversal patterns.

Uber has remained above the 50-week moving average, while the Relative Strength Index (RSI) and the MACD indicators have pointed upwards. Therefore, the stock will likely continue soaring, as bulls target the next point at $100. 

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