Uber’s Q4 Results Show Mixed Signals: Time to Reconsider Your Investment?

Shares of Uber Technologies (NYSE: UBER) dropped 7.6% on February 5 following the release of its Q4 results. Although the stock rebounded later in the week, it remains approximately 20% below its all-time high.

Let’s take a closer look at Uber’s recent performance to determine if investing in this leading ride-share company is worthwhile.

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Disappointed Guidance on Bookings

In Q4, Uber’s revenue rose by 20% compared to the previous year, reaching $12.0 billion, exceeding the analyst consensus of $11.8 billion. The mobility sector, primarily ride-sharing, saw a 25% uptick to $6.9 billion, while delivery revenue, including Uber Eats, climbed by 21% to $3.8 billion. However, the freight segment’s revenue remained flat at approximately $1.3 billion.

Gross bookings, representing the total value of services on the company’s platform (excluding tips), increased by 18% to $44.2 billion, with growth both in mobility and delivery sectors. The number of trips taken also rose by 18% year over year, and the monthly active users surged by 14%.

In terms of profitability, adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) grew by 44% to $1.8 billion.

Looking ahead to Q1, Uber projects gross bookings between $42.0 billion and $43.5 billion, falling short of analysts’ expectations. They anticipate adjusted EBITDA will range from $1.79 billion to $1.89 billion, indicating growth between 30% to 37%.

Despite facing challenges like rising insurance costs, the company remains optimistic about its three-year outlook, predicting mid-teens to high-teens growth in gross bookings along with 30% to 40% profitability. To address higher expenses, they are implementing safety technologies, including driver-insights dashboards.

Additionally, Uber plans to collaborate with Alphabet‘s Waymo to roll out driverless ride-share services in Austin and Atlanta this year. While management acknowledges the ongoing advancements in this area, they still believe that widespread commercialization will take time due to high hardware costs.

They project that autonomous driving could capture 10% to 15% of the market within the next five years, considering it a $1 trillion opportunity in the U.S., contingent on several factors such as regulation, safety standards, reduced hardware costs, and a supportive operational network.

Image source: Getty Images

Should You Buy the Dip?

Currently, Uber’s challenge lies in uncertainty among investors regarding its role in the transition towards autonomous driving. Competing companies like Waymo already provide paid robotaxi services in multiple markets, while Tesla is also pursuing substantial growth in this field. Although Uber possesses valuable data to deploy efficient robotaxi fleets, competitors may acquire similar insights over time.

Uber appears to be positioning itself as a hands-on operator for supporting a network of both human drivers and autonomous vehicles. However, whether this partnership will satisfy Waymo and Tesla long-term remains uncertain. As Uber launches its initiative in Austin and Atlanta, the outcomes could reveal how the company evolves its strategy for sustained relevance.

That said, these transitions may take years. Currently, Tesla has yet to operate paid robotaxis, and Waymo’s existing hardware remains prohibitively expensive. It’s possible that Uber’s business model will closely resemble its present state over the next five years.

From a valuation standpoint, Uber’s stock trades at a forward price-to-earnings (P/E) ratio of 20, based on analysts’ forecasts for 2025.

Data by YCharts.

Uber has an opportunity to carve out its niche within the changing ride-share landscape, and the stock currently appears reasonably priced. Based on its current path, investors may enjoy solid returns long before addressing any uncertainties posed by driverless technology.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Geoffrey Seiler has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet, Tesla, and Uber Technologies. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.