GOOG - Uber: Are Robotaxis A Threat? (Rating Downgrade)

2024-04-09 09:38:30 ET

Summary

• We've been bullish on Uber in the past, and the stock has gone on quite the run over the last few quarters, reflecting an improving fundamental outlook.
• Despite this, competitors continue to make progress on robotaxis, and we're unsure how Uber will be able to respond to this key threat.
• This risk could have a serious impact on ~50% of Uber's revenue, which could result in negative growth and / or a much lower valuation going forward.
• When combined with the presently elevated multiple, we think the balance of risks and rewards for investing in Uber has come towards equilibrium.
• We downgrade Uber to a 'Hold'.

In the past, we've been a big bull on Uber Technologies ( UBER ).

Over the last ~10 months, we've published three 'Strong Buy' articles on the company, covering various aspects of the business, including how we see revenue potentially doubling by 2026, and how $150 per share seems relatively reasonable to us - over time, if the company can maintain its current growth and profitability trajectory:

These calls have largely born out to be accurate, and the stock is up more than 86% since our initial article from last June, outperforming the S&P by more than 3x.

However, as competitors like Tesla ( TSLA ) and Waymo ( GOOG ) continue to improve their self-driving capabilities, we're left wondering how sustainable Uber's core mobility offering is over the long term, especially given that the driver is a huge chunk of the cost when it comes to ride hailing in general....

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