SHOULD YOU BUY UBER STOCK?
Uber continues to express its desire to diversify diversify diversify. As well as their rides and food delivery businesses, the company continues to expand into self-driving technology, shared scooters and bikes, freight and now the "uber" competitive grocery delivery space filled with competitors like Ocado and Amazon!
It's no surprise really given how their food delivery business has saved them this quarter (+89%), as rides were down 80%! This diversification has kept Uber stock within 5% of where it traded 6 months ago despite a global lockdown that has wrecked hyper focused ride sharing company Lyft (which is down almost 40% over the past 6 months... Ouch!).
There is however the possibility of Uber stretching itself too thin as it did a couple of years ago. The company's aggressive growth tactics has in the past backfired as they had to exit China, Russia and South East Asia after failing to compete with local rivals. These decisions are costly and also take away vital resources from a company that is not yet profitable.
Yet, I imagine Uber has learnt from its rapid and unsuccessful land grab attempts of the past and their recent acquisition of Postmates for $2.65bn will give them a 30% market share in the US food delivery space. This is a sector that will only get bigger, as will the self-driving vehicle market that Uber is desperately trying to position itself within.
Competition is going to be tough in all of the areas that Uber is going after however, that will always be the case in such high growth sectors. The good news is that Uber will have more time and resources moving forward as the company looks set to become profitable in 2021.
Nobody can deny that Uber has great prospects, but the problem has always been their valuation. However, since falling 30% from its all-time high whilst allowing their earnings to catch up, Uber now represents a lot better value. In fact, on an Enterprise Value to Revenue basis (EV/R) the stock is a lot cheaper than their less diversified competitors such as Ocado (grocery delivery), Grubhub & Just Eat (food delivery).
Uber's closest rival Lyft may be cheaper on most metrics however, you get what you pay for and I think that Uber gives you a lot more safety and exposure to clear growth industries than Lyft does!
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