Uber (NYSE: UBER) stock is having a great run right now. Year to date, it’s up around 75%.
I think it’s still worth buying at current levels however, and last week I bought a few shares for my ISA. Here are five reasons I invested in the technology company.
Dominating the mobility space
One thing that appeals to me about Uber is that it has a monopoly in the mobility space.
There are a few other players in the industry, such as Lyft and Bolt. But in terms of market share, these companies have nothing on Uber, which is so powerful that its name has become a verb.
And the smaller players are being hit hard by the higher cost of capital, which is negatively impacting their business economics.
A focus on profits
I also like the fact that management is heavily focused on cash flow and profitability right now.
Like other tech companies such as Meta and Amazon, it’s exiting unprofitable businesses in order to become more efficient (while leaning into profitable business segments such as digital advertising).
It’s worth noting here that while analysts only expect a net profit of $43m this year, they anticipate a figure of $1,888m next year. That’s an enormous increase.
And with earnings per share expected to come in at $0.90 in 2024, the stock is trading on a forward-looking P/E ratio of less than 50, which isn’t crazy for a fast-growing US technology company.
Now if Uber can demonstrate consistent profitability, it’s likely to be added to the S&P 500 index (this could happen in 2024). This could be a game-changer for the stock, as it would force a lot of institutional investors to buy it.
It’s worth noting that a lot of institutional investors are already piling into the stock. Legendary investor George Soros, for example, purchased 257,500 Uber shares in the first quarter of 2023. This upped his holding by 45%.
As for growth, I see both short- and long-term growth potential. In the short term, the company looks set to benefit from the global shift from spending on goods to spending on experiences.
Meanwhile, in the long term, it looks set to benefit from the growth of the travel industry (baby boomers love to travel).
I also think that in the long run, Uber will have self-driving vehicles (it recently partnered with Waymo to launch self-driving cabs in some US cities). Autonomous vehicles could reduce its costs significantly, and lead to much higher profits.
Strong share price momentum
Finally, I like the fact that the share price is in a strong uptrend. It’s worth noting that the stock formed a huge ‘double-bottom’ pattern between March 2020 and July 2022. This is very bullish, in my view.
A higher-risk stock
Now, I’ll point out that I see Uber as a speculative, higher-risk stock. I only have a very small position here.
After a 70% rise this year, there’s always the chance of a decent pullback. However, I think it has a lot of potential. With a market-cap of just $87bn, there’s a lot of room for growth, in my view.