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Private Capital Markets

Uber Technologies  / Private Capital Markets

<div class="content-highlight"><p style="text-align: center;">The ride-hailing pioneer is likely to maintain its competitive advantage via its network effect</p></div><hr><h2>Uber May Be Picking Up Moat Sources as Quickly as It Picks Up Riders </h2><p>We've taken a deeper look at privately held <a href="https://www.smartkarma.com/entities/430" target="_blank" data-smartkarma-citation="entities:430:1">Uber Technologies Inc (0084207D US)</a>, the ridesharing service provider that sits at the number-two spot in the world (based on rides hailed) and is attempting to gain traction in what we estimate to be a $630 billion addressable market for the company by 2022. In our view, Uber's core business, the ridesharing platform, would warrant a narrow economic moat rating as it has displayed some moat sources such as network effects and intangible assets, which could position the firm to become profitable and generate excess returns on invested capital in the future. </p><p>Based on our analysis and using publicly available data on Uber's financials from The Wall Street Journal as a starting point, we value Uber at a $110 billion market capitalization, ahead of the company's last valuation round of nearly $62 billion in May, according to PitchBook. We project that Uber's net revenue will grow at a 27% average annual pace over the next 10 years to $82.4 billion. We foresee Uber continuing to spend on expansion and research and development but think it will become profitable by 2022. The company is likely to go public during the second half of 2019, and considering its success at raising capital, we expect the initial public offering price to value Uber between $100 billion and $110 billion.</p><p>Looking ahead, Uber may leverage its moaty ridesharing business and tap into other growth opportunities, including bikesharing, meal takeout and delivery (Uber Eats), freight brokerage (Uber Freight), and ridesharing via autonomous vehicles. In our view, autonomy is the most transformative technology set to affect the world of ridesharing; we see powerful economic forces driving autonomous vehicle adoption in the ridesharing industry, from which Uber may benefit.</p><p>On the other hand, risks remain, such as increased competition and the firm's legal issues, which gave Uber a tainted reputation under former CEO Travis Kalanick. We believe that under new CEO Dara Khosrowshahi, Uber will see better days; however, pressure brought forth by legal matters will persist.</p><hr><h2>Key Takeaways </h2><ul>
<li>Uber's core business, the ridesharing platform, has displayed some moaty characteristics such as network effects and intangible assets, which could position the firm to become profitable and generate excess returns on invested capital in the future. </li>
<li>We expect Uber to grab nearly 50% of the ridesharing market by 2022 (up from 29% in 2017) as it leverages its first-mover advantage along with its network effect and data moat sources. </li>
<li>We value Uber's total addressable market, which includes the aggregate of the global taxi, rideshare, and food delivery industries along with the U.S. markets for freight brokerage and the share we believe rideshare companies can take from global public transport and U.S. bikeshare, at $630 billion by 2022, representing a 26% five-year compound annual growth rate.</li>
<li>We estimate a market capitalization of $110 billion for Uber as the firm is projected to increase its top line by 27% annually during the next 10 years and become profitable in 2022.</li>
</ul><hr><div class="content-remarks"><p>Companies mentioned: <a href="https://www.smartkarma.com/entities/11369" target="_blank" data-smartkarma-citation="entities:11369:1">Alphabet Inc Cl C (GOOG US)</a>, <a href="https://www.smartkarma.com/entities/5881" target="_blank" data-smartkarma-citation="entities:5881:1">Grubhub Inc (GRUB US)</a></p></div><p><em>Analysts: Ali Mogharabi, Julie Bhusal Sharma, Asad Hussain and Brian Colello</em></p>

The ride-hailing pioneer is likely to maintain its competitive advantage via its network effectUber May Be Picking Up Moat Sources as Quickly as It Picks Up Riders We've taken a deeper look at privately held Uber Technologies Inc (0084207D US), the ridesharing service provider that sits at the number-two spot in the world (based on rides hailed) and is attempting to gain traction in what we estimate to be a $630 billion addressable market for the company by 2022. In our view, Uber's core business, the ridesharing platform, would warrant a narrow economic moat rating as it has displayed some moat sources such as network effects and intangible assets, which could position the firm to become profitable and generate excess returns on invested capital in the future. Based on our analysis and using publicly available data on Uber's financials from The Wall Street Journal as a starting point, we value Uber at a $110 billion market capitalization, ahead of the company's last valuation round of nearly $62 billion in May, according to PitchBook. We project that Uber's net revenue will grow at a 27% average annual pace over the next 10 years to $82.4 billion. We foresee Uber continuing to spend on expansion and research and development but think it will become profitable by 2022. The company is likely to go public during the second half of 2019, and considering its success at raising capital, we expect the initial public offering price to value Uber between $100 billion and $110 billion.Looking ahead, Uber may leverage its moaty ridesharing business and tap into other growth opportunities, including bikesharing, meal takeout and delivery (Uber Eats), freight brokerage (Uber Freight), and ridesharing via autonomous vehicles. In our view, autonomy is the most transformative technology set to affect the world of ridesharing; we see powerful economic forces driving autonomous vehicle adoption in the ridesharing industry, from which Uber may benefit.On the other hand, risks remain, such as increased competition and the firm's legal issues, which gave Uber a tainted reputation under former CEO Travis Kalanick. We believe that under new CEO Dara Khosrowshahi, Uber will see better days; however, pressure brought forth by legal matters will persist.Key Takeaways 
Uber's core business, the ridesharing platform, has displayed some moaty characteristics such as network effects and intangible assets, which could position the firm to become profitable and generate excess returns on invested capital in the future. 
We expect Uber to grab nearly 50% of the ridesharing market by 2022 (up from 29% in 2017) as it leverages its first-mover advantage along with its network effect and data moat sources. 
We value Uber's total addressable market, which includes the aggregate of the global taxi, rideshare, and food delivery industries along with the U.S. markets for freight brokerage and the share we believe rideshare companies can take from global public transport and U.S. bikeshare, at $630 billion by 2022, representing a 26% five-year compound annual growth rate.
We estimate a market capitalization of $110 billion for Uber as the firm is projected to increase its top line by 27% annually during the next 10 years and become profitable in 2022.
Companies mentioned: Alphabet Inc Cl C (GOOG US), Grubhub Inc (GRUB US)Analysts: Ali Mogharabi, Julie Bhusal Sharma, Asad Hussain and Brian Colello

Uber May Pick Up Investors, Along With Riders, in Its IPO