Uber: A 30% Pullback, But Still a Growth Stock to Buy

Uber (UBER) has been a rollercoaster ride for investors in recent months. After hitting an all-time high of $86.34 in October 2024, the stock has pulled back by about 30% amid concerns about its cautious near-term guidance and a Federal Trade Commission (FTC) probe of its Uber One subscription service. Despite these headwinds, Uber's long-term growth prospects remain strong, making it an attractive investment opportunity for long-term investors.



Uber's recent stock price decline can be attributed to several factors. Firstly, the company's cautious near-term guidance raised concerns about its growth trajectory. Secondly, a Federal Trade Commission (FTC) probe into Uber One's enrollment and cancellation policies added uncertainty. Lastly, the Federal Reserve's warning of slower rate cuts in 2025 exacerbated selling pressure. However, Uber's strong fundamentals, including its wide moat, attractive valuations, and robust growth prospects, suggest that this pullback may represent a golden buying opportunity for long-term investors.



Uber owns one of the world's largest ride-hailing and food delivery platforms, with a total of 161 million monthly active platform customers. The company has consistently grown its gross bookings and revenue at a compound annual growth rate (CAGR) of 23% and 27%, respectively, from 2018 to 2023. Its subscription-based service, Uber One, has locked in over 25 million members, further strengthening its network effect.

Uber's expansion into new services like Uber One and Uber Teens has significantly contributed to its growth and competitive advantage. Uber One provides a steady revenue stream and enhances customer loyalty, while Uber Teens expands Uber's user base and opens up new market segments. These services, along with the expansion of enterprise and healthcare delivery services, have driven Uber's take rate consistently higher, improving its pricing power.

In 2024, Uber expects its gross bookings to grow 17%-18%, with analysts expecting total revenue to rise 17% this year and 16% to $50.6 billion in 2025. With an enterprise value of $131.5 billion, Uber's stock looks cheap at just 2.6 times next year's sales. Lyft, which has an enterprise value of $5.0 billion, trades at less than one times next year's sales, but it might deserve that discount because it faces tougher near-term challenges than Uber.

On the bottom line, Uber turned profitable on the basis of generally accepted accounting principles (GAAP) in 2023, with analysts expecting its GAAP EPS to grow 117% in 2024 and 22% in 2025. At $61 a share, its stock still looks attractively valued at 26 times next year's earnings.

In conclusion, Uber's recent 30% stock price decline presents an attractive entry point for long-term investors. Despite near-term challenges, Uber's strong fundamentals, wide moat, and robust growth prospects make it an appealing investment opportunity. As the company continues to expand its ecosystem, investors who accumulate the stock after its recent pullback could be well rewarded over the next few years.