Uber Shares Up 121% in 2 Years: But Is Now the Time to Buy?

Despite taking shareholders on a very bumpy ride, Uber (UBER -0.95%) was a big winner. In the last 24 months, from August 2022, the shares in it growth technology stock have skyrocketed by 121%. Investors would have doubled their money by owning this business, compared to a 34% return from S&P 500 index.

But is now the right time to buy Uber?

Financial performance

It’s hard to ignore what’s going on MACRO the uncertainty that worries investors. Inflation is still well above the Federal Reserve’s 2 percent target, and high interest rates continue to stoke recession fears. That inadequate backdrop makes Uber’s results — which beat Wall Street estimates — all the more impressive.

Revenue grew 16% year-over-year in the second quarter (Q2 2024 ended June 30), driven by strong double-digit growth in trips, monthly active users and gross bookings on both the mobility and delivery sides.

“Based on what we’re seeing today, Uber’s consumer is in great shape,” CEO Dara Khosrowshahi said on The Q2 2024 earnings call. “Our audience is bigger than ever and using our services more frequently than ever.”

The top-line earnings in Q2 comes on the back of a 17% increase in revenue in 2023. The COVID-19 pandemic has certainly created a major disruption for the company. However, Uber has bounced back in impressive fashion.

And what was once a money-losing enterprise has now been turned into a profit machine. In the first six months of this year, Uber generated operating income of $968 million. This was 15 times more than in the same period in 2023.

Uber is showing that it can scale its business model in a profitable way. Its big operating expense items, such as sales and marketing and research and development, fell in the second quarter compared to Q2 2023. No wonder the bottom line is expanding rapidly.

Economic moat

To be clear, investors need to pay attention to the competitive nature of the industry. There are, of course, direct rivals like Lyft and DoorDash. But when it comes to mobility, consumers can choose to drive, take a taxi, walk, bike or use public transport. In terms of delivery, people can buy groceries or go out to eat at a restaurant.

Despite this setup, Uber has built a economic moat which protects its competitive position on the market. completed nearly 2.8 billion trips and had nearly $40 billion in gross bookings in Q2. And its services are available in over 10,000 cities worldwide. This broad coverage is unmatched.

As a result, Uber benefits from strong network effects. Riders ride the platform because it has a dense population of drivers available. And drivers choose to work for Uber because of its huge rider base. The network becomes more valuable to both stakeholders the larger it becomes.

Uber rating

After Uber’s monumental performance over the past two years, it might be surprising that the stock isn’t wildly expensive. It is traded at a the forward price-earnings ratio from 31.6. This represents a 16% premium for Nasdaq 100 Index.

But I think it might still make sense to stock up. According to Wall Street consensus analyst estimates, Uber is expected to grow its earnings per share at a compound annual rate of 52% between 2023 and 2026. This means that the current valuation becomes more compelling as the bottom line expands considerably in the future.

While it’s always a good idea to take predictions like this with a grain of salt, Uber’s current trajectory makes it easy to be optimistic.