Why is Uber So Cheap?

The network effect is alive and well.

Andrew Willis 30 July, 2021 | 4:38AM
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Andrew Willis: Recently, Chinese ride-hailing app Didi found itself the subject of regulatory action around its data collection practices. Well, that same type of competitive advantage drives Uber (UBER) and its currently underappreciated ‘network effect’.

Where it may be uncertain for Didi, Uber’s moat sources aren’t running out of fuel. Senior equity analyst Ali Mogharabi sees a virtuous cycle for the structure of Uber’s data collection, where it can improve the timeliness of matching drivers with riders, which in turn generates more rides, drivers, and passengers and then – more data.

The compounding nature of this growth at Uber thanks to its network effect has it on track to be the leader in an estimated 452 billion U.S. dollar market by 2024. Now they just need to become profitable…

For Morningstar, I’m Andrew Willis.

 

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Uber Technologies Inc38.00 USD-4.28Rating

About Author

Andrew Willis

Andrew Willis  is Content Editor for Morningstar.ca. Follow him on Twitter @AndrewWillisCDN.

 

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