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Uber Technologies (NYSE: UBER) hasn’t looked back since joining the S&P 500 index back in December 2023. In fact, the stock is up 50% this year alone!
On 24 June, the Uber share price jumped 7.5% to $92, setting a new record high. I was happy to see this, as I bought the stock for my ISA back in September. And I named it here as my favourite US stock to consider buying for 2025.
Here are three reasons why I’m still bullish on Uber.
Improving profits
The first key attraction for me here is the firm’s transformation into a profitable enterprise. In years gone by, Uber adopted a growth-at-all-costs strategy, launching in hundreds of cities and subsidising rides to undercut taxi rivals. This blitz saw it burn through tens of billions of dollars.
However, due to cost discipline and a streamlined focus, Uber turned free cash flow positive in 2023. In Q1, adjusted EBITDA grew 35% year on year to $1.9bn, while free cash flow of $2.2bn was 66% higher. And management sees further profitable growth ahead.
Consequently, many fund managers that wouldn’t have previously considered Uber have started invested. One is Bill Ackman, the billionaire hedge fund manager who started buying the shares in January. He said: “We believe Uber is one of the best managed and highest quality businesses in the world.”
Another is Blue Whale Growth Fund manager Stephen Yiu, who said Uber has “a long runway for profitability growth.”
Robotaxi partnerships
The second reason I’m bullish is because Uber looks perfectly placed to benefit from the robotaxi revolution. This is why the stock popped this week, as the company launched autonomous ride-hailing with Waymo in parts of Atlanta.
In other words, people there can now book a driverless Waymo taxi, only on the Uber app. Rides are also exclusively available on Uber in Austin, where there are now 100 Waymo robotaxis.
Customers in Austin have been rating their Waymo trips, on average, as 4.9 stars. So they’re enjoying the experience.
Now, the elephant in the room here is Tesla, which is hesitantly testing its own robotaxis in Austin. We don’t know whether Tesla’s vision-based AI technology is safe enough to scale up. But if it can deliver driverless taxis at sharply lower costs, Tesla is a long-term threat to Uber.
However, multiple companies worldwide are racing to launch robotaxi services. Uber has signed partnerships with most of them.
Uber is uniquely positioned to be the single infrastructure layer connecting robotaxis to riders, no matter who owns the car.
Blue Whale Growth Fund.
Uber One
The company benefits from a powerful network effect, meaning it becomes increasingly valuable as more drivers and riders join the platform. This is likely to strengthen due to Uber One, its subscription service.
As a member, I think I get great value for £4.99 a month (free food delivery, ride credits, etc). In fact, it’s probably a subscription staple for me, along with Amazon Prime, Netflix, and Apple Music. I think Uber has lots of room to gradually raise prices.
Uber One now has 30m members, and they’re spending three times more than non-members. Advertising is another high-growth segment.
The stock is trading at 26 times forward earnings. At this price, I think Uber is still worth considering.
