1 Super Stock That Could Turn $200,000 Into $1 Million By 2034

Self-driving cars are no longer science fiction. Numerous start-ups and established technology companies have developed autonomous platforms to transform the way we travel, and it is an industry with significant long-term financial potential.

Uber technologies (NYSE: UBER) could be one of the biggest beneficiaries of the shift to autonomous driving. It operates the largest ride-hailing network in the world, so it will be attractive to any self-driving vehicle developer looking to reach the most customers. In addition, autonomy could save Uber substantial amounts of money, given that human drivers are currently its biggest cost.

In fact, I think Uber stock could go up fivefold over the next decade for those very reasons. Here’s how you could turn $200,000 into $1 million by 2034.

Autonomy could be a substantial financial boon for Uber

In the latest second quarter of 2024 (ended June 30), Uber had a record 156 million monthly platform customers. Over the past four quarters, Uber has accepted $150.4 billion in gross bookings for ride-hailing, food delivery and commercial transportation. A gross booking is the total cost of a ride or food order, which includes driver fees.

Over the same time period, Uber paid about $67.7 billion to its drivers, making it the company’s highest cost by a wide margin. After stripping out drivers and funds paid to restaurants for food orders, Uber’s $150.4 billion in bookings over the past four quarters translated into just $40 billion in revenue.

Then, once Uber accounted for operating expenses like marketing and research and development, it made a GAAP net profit of just $2 billion. That number should improve over the next few years as the company is focused on becoming more efficient. But I wanted to highlight the huge gap between what customers pay Uber ($150.4 billion) and what ultimately ends up on the bottom line ($2 billion).

That’s why autonomous vehicles could transform Uber’s economy. The transition to self-driving cars could take a decade or more, but it would eliminate the $67.7 billion a year the company spends on human drivers. Some of this cost will be replaced by fees payable to the owners of autonomous vehicles on Uber’s network, but given that they can operate around the clock with minimal expense, there will undoubtedly be savings.

In theory — and this isn’t necessarily on the agenda — Uber could also buy a fleet of its own autonomous vehicles for the most popular cities and reap 100 percent of the revenue from each ride. This would be a real game changer.

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Uber is already very focused on autonomous vehicles

Uber is partnering with 10 different companies developing autonomous vehicles, and many of them are already active on the network. During the second quarter, Uber said self-driving rides increased six times compared to the period a year ago.

Alphabet the Waymo subsidiary is one of Uber’s active partners. Customers can already get a self-driving Waymo through the Uber app in Phoenix, Arizona, and the two companies also launched self-driving grocery delivery in April.

Then there’s Aurora, a mobility company that acquired Uber’s autonomous vehicle project in 2020. As part of the deal, Uber took a stake in Aurora, which is currently worth about $900 million. The two companies are closely aligned and have just expanded their partnership with the launch of Premier Autonomy, which will allow Uber Freight to use Aurora trucks to transport commercial cargo.

In July, Uber also announced a multi-year partnership with China’s electric vehicle (EV) giant BYD. It will involve bringing 100,000 human-driven BYD electric vehicles onto Uber’s network, but the two companies have also agreed to collaborate on self-driving vehicles, with a view to deploying them on Uber in the future.

It’s clear that Uber is already the leading platform for autonomous vehicles, but it will face competition in the near future. adzefor example, it has developed some of the most advanced self-driving software in the industry, and its CEO, Elon Musk, wants to build a transportation network within the company.

Uber has a distinct advantage because of its enormous customer base, but Tesla is a popular brand among consumers, so it will surely take market share in the autonomous space.

The road to fivefold growth in a decade

Based on Uber’s trailing 12-month revenue of $40 billion and current market cap of $152.8 billion, its stock trades at a price-to-sales (P/S) ratio of 3.8. Assuming the P/S ratio remains constant, Uber will need to generate $200 billion in annual revenue by 2034 to justify a five-fold gain in its stock.

This means Uber will need to grow its revenue at a compound annual rate of 17.5% over the next 10 years. Between 2017 and 2023, the company grew its revenue by 29.4% per year, and Wall Street’s full-year forecast for 2024 indicates growth of 24.6%.

Note that Uber has achieved the above with almost no real input from self-driving so far. Therefore, the company could even generate accelerated growth in the coming years as more of the $67.7 billion it spends annually on human drivers is potentially converted into revenue.

Additionally, Uber’s P/S ratio of 3.8 is well below its peak of 8.9. I’m not saying it will return to that level, but the standalone business could lead investors to assign a higher valuation to the company because of its long-term potential. Any increase in the P/S ratio could drive Uber to a five-fold increase in its stock even earlier than 2034.

So Uber stock looks like a prime candidate to turn a $200,000 investment today into $1 million in a decade. But don’t worry – investors with any initial balance could make a five-fold return if the above scenario plays out.

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Suzanne Frey, chief executive at Alphabet, is a member of the Motley Fool’s board of directors. Anthony Di Pizio has no position in any of the shares mentioned. The Motley Fool has positions in and recommends Alphabet, BYD Company, Tesla and Uber Technologies. The Motley Fool has a disclosure policy.

1 Super Stock That Could Turn $200,000 Into $1 Million By 2034 was originally published by The Motley Fool