Billionaire Bill Ackman Buys a Monster Growth Stock Called a "Sleeping Giant" by a Wall Street Analyst

Bill Ackman, the billionaire hedge fund manager and CEO of Pershing Square Capital Management, has made a significant investment in Uber Technologies (NYSE: UBER), acquiring more than 30 million shares worth over $2 billion. This move comes as Wall Street analyst Thomas Champion at Piper Sandler has referred to Uber as a "sleeping giant" due to its strong core businesses and adjacent opportunities in autonomous driving and advertising. Ackman's investment strategy aligns with this perspective, as he seeks to unlock the long-term value of the company.

Uber's core business in ride-sharing and food delivery creates adjacent opportunities in autonomous driving and advertising, with significant market sizes and potential revenue streams. The company's scale and data advantage position it well for these opportunities:

1. Autonomous Driving: Uber has partnered with Alphabet's Waymo to expand its reach in autonomous vehicles, positioning it as the dominant platform for AV monetization. The company sees autonomous driving as a $1 trillion-plus opportunity in the U.S. alone, with the potential to generate substantial revenue through ride-sharing services using autonomous vehicles.
2. Advertising: Uber's scale and data advantage allow it to target advertising based on user preferences implied by their travel and delivery history. This enables brands to reach consumers more effectively and personalize their advertising campaigns. Thomas Champion at Piper Sandler estimates that Uber's advertising sales can reach $5 billion by 2027, representing a significant opportunity for the company to diversify its revenue streams and tap into the growing digital advertising market.

Uber's current valuation is only slightly higher than its record low of 19 times free cash flow, which it hit in December. The stock is trading at 23 times free cash flow, a discount to the one-year average of 32 times free cash flow. Wall Street analysts have a consensus price target of $2.04 per share for Uber stock, which is only a tad above the stock's present price. However, this may be one of those cases where Wall Street is underestimating what awaits Uber.

There are several potential catalysts for a bullish repricing of the stock:

1. Strong presence in the mobility and food-delivery markets: Uber has a strong presence in the mobility and food-delivery markets, with a scale that creates a powerful network effect. This scale has resulted in a 14% increase in monthly active platform consumers and an 18% increase in trip count in the recent quarter.
2. Opportunities in advertising and autonomous driving: Uber's scale affords it a data advantage that lets brands target advertising based on user preferences implied by their travel and delivery history. Additionally, Uber has an underappreciated opportunity in autonomous driving, with a partnership with Waymo to widen its reach in Phoenix and expand into Austin and Atlanta.
3. Expected revenue growth: Analysts are calling for 42% top-line growth in the coming year, following this fiscal year's expected 26% revenue tumble. This growth is expected to persist at least into the following year, when the company should move to within sight of swinging to a profit.

In conclusion, Uber's core business in ride-sharing and food delivery creates adjacent opportunities in autonomous driving and advertising, with significant market sizes and potential revenue streams. Bill Ackman's investment strategy aligns with this perspective, as he seeks to unlock the long-term value of the company. With a historically cheap valuation and several potential catalysts for a bullish repricing, Uber stock may be an attractive investment opportunity for patient investors.