Uber Stock Gears Up for a Massive Growth Ride

Key Points

• Some stocks are easy to spot early before they become multi-baggers in the future, and Uber has all of the qualitative and quantitative reasons to become one.
• All of its KPIs are running hot, and Wall Street forecasts are even better 12 months ahead.
• Institutional buyers see the double-digit upside potential in the stock price coming up.

According to many of the professional and biggest value investors in the stock market today, there are stocks that are easy to spot early on before they become industry leaders. This is paramount to wealth compounding since, as these companies grow from middle-sized businesses to industry leaders, their stock prices tend to become multi-baggers.

The way to spot these names is simpler than it looks. A common stance is when a company becomes a verb. That’s when investors usually know when a stock is going to be set up for a massive run in the coming years. Knowing this, it becomes clear that shares of Uber Technologies Inc. NYSE: UBER fit right into this category of compounding investments for the coming years if not decades.

Now that the stock trades at only 70% of its 52-week high, as markets think that Alphabet Inc. NASDAQ: GOOGL can overtake Uber’s market share in the ride-sharing industry, investors have what could turn out to be the best chance to get behind this name at the best price of the year. This is a fact that Wall Street analysts and institutional investors know too well.

All of Uber’s KPIs Are Red Hot

Every industry and company has its own key performance indicators (KPIs). Still, when it comes to the technology sector, there is one that usually trumps them all. And that one is tied to the user base a company has grown and whether it keeps on growing at the correct rates.

For Uber, investors can look at gross bookings, which grew by 16% over the past 12 months to $41 billion. As bullish as this initial metric may be, it’s only the tip of the iceberg for Uber’s business and future outlooks. Delivery gross bookings reached $18.7 billion, delivering another 17% double-digit annual growth rate for Uber.

Of course, all of this is driven by the company’s user base, which reflects Uber’s growth and adoption of the market share. Monthly active users, one of the main drivers of a technology stock’s valuation, grew to 161 million for the third quarter of 2024, up by 13%  compared to last year’s 142 million.

Tying this all together, investors arrive at net revenue growth of 20%, and it becomes clear that Uber stock should not be this low today compared to its 52-week highs. However, as important as revenue is, there is another financial metric investors can point to justify today’s potential upside in the stock.

That is free cash flow (operating cash flow minus capital expenditures). This metric grew to $2.1 billion for the quarter, up 133% from the year prior, and it speaks volumes about Uber's current profitability.

Market Sentiment Turns Bullish for Uber Stock

With this free cash flow, management decided to allocate up to $375 million to a stock buyback program, letting investors and markets know that the stock is not only cheap today but also expected to increase in value in the near future. Insiders weren’t the only ones willing to express their optimism, though.

Those from Geode Capital Management decided to boost their holdings in Uber stock by as much as 2.1% as of November 2024; this new addition would net their position at $3.2 billion today, or 2% ownership in the company. Wall Street analysts, as afraid as they are to boost a beaten-down stock, seem to have no problem with Uber.

That is why Tigress Financial decided to reiterate their buy rating on the company, this time boosting their valuations to a high of $103 a share. Considering that these ratings were issued as recently as December 2024, the implied upside of as much as 70% from today’s price seems reasonable enough.

More than reasonably, it is justified by not only the double-digit growth across the board but also by where Wall Street expects Uber’s earnings per share (EPS) to land for the coming years. For the next 12 months, the forecasts suggest an EPS of $3.15, while for the year 2026, it looks more like $4.02.

This would mean a respective growth rate of 162% to 235% from today’s level of only $1.20 in EPS. This way, investors can have both the qualitative and quantitative reasoning behind a double-digit, if not a triple-digit, rally brewing up for Uber stock in the coming quarters.

With this in mind, there is a reason that markets are willing to pay a premium for the stock on a price-to-book (P/B) multiple compared to the rest of the computer sector. A valuation of 10.4x today commands a significant premium over the computer sector’s average of 8.3x.

Some would call this expensive, but others will realize that the market always pays a premium for companies it expects will outperform other peers, and now investors have more reasons than ever to justify this premium.