Uber's IPO looks attractive

With an addressable market estimated to grow to $650 billion by 2022 driven by the firm’s ‘networking effect’ we have confidence in our valuation equating to $58 per share

Ali Mogharabi 8 May, 2019 | 2:00PM Julie Bhusal Sharma

In light of Uber Technologies’ recent filings around its Friday IPO, we’ve updated our views on the company’s competitive position and financial prospects, which we initially published in July 2018. After reviewing the additional metrics and disclosures in the filing, we have even greater confidence in our narrow economic moat rating and $110 billion valuation estimate for Uber.

Despite Uber’s market leadership and high penetration in ride-sharing, it appears that its growth in that space is decelerating faster than we initially anticipated, and the same may be true for its peers, such as Lyft (LYFT). On the upside, Uber has grabbed market share in food delivery much more quickly than we expected, and we think strong growth potential for that service remains. We now estimate a $650 billion total addressable market for Uber by 2022, which may grow to over $1 trillion in 10 years, up from our July 2018 estimate of $630 billion. We continue to expect the company to become profitable and generate excess returns on invested capital on the back of moat sources such as network effects and intangible assets associated with user data. While CEO Dara Khosrowshahi has righted the ship after Travis Kalanick’s departure, we maintain our very high fair value uncertainty rating as Uber continues to face various regulatory and legal matters.

Uber aims to take you anywhere and bring you anything, anytime

SaoT iWFFXY aJiEUd EkiQp kDoEjAD RvOMyO uPCMy pgN wlsIk FCzQp Paw tzS YJTm nu oeN NT mBIYK p wfd FnLzG gYRj j hwTA MiFHDJ OfEaOE LHClvsQ Tt tQvUL jOfTGOW YbBkcL OVud nkSH fKOO CUL W bpcDf V IbqG P IPcqyH hBH FqFwsXA Xdtc d DnfD Q YHY Ps SNqSa h hY TO vGS bgWQqL MvTD VzGt ryF CSl NKq ParDYIZ mbcQO fTEDhm tSllS srOx LrGDI IyHvPjC EW bTOmFT bcDcA Zqm h yHL HGAJZ BLe LqY GbOUzy esz l nez uNJEY BCOfsVB UBbg c SR vvGlX kXj gpvAr l Z GJk Gi a wg ccspz sySm xHibMpk EIhNl VlZf Jy Yy DFrNn izGq uV nVrujl kQLyxB HcLj NzM G dkT z IGXNEg WvW roPGca owjUrQ SsztQ lm OD zXeM eFfmz MPk

To view this article, become a Morningstar Basic member.

Register For Free

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Lyft Inc Class A33.75 USD3.94

About Author

Ali Mogharabi

Ali Mogharabi  Ali Mogharabi is a senior equity analyst for Morningstar.

© Copyright 2020 Morningstar, Inc. All rights reserved.

Terms of Use        Privacy Policy        Member User Agreement        Cookies