r/valueinvesting
Speaking of Uber and Valuations
Author argues Uber is overvalued citing inflated P/E due to one-time gains, declining margins, and hidden liabilities in insurance reserves despite positive community sentiment.
- Adjusted P/E is ~40x after removing a $6.6B one-time benefit, which is expensive given slowing revenue growth of only 18%.
- Earnings have reportedly dropped 85% year-over-year, indicating a deteriorating profitability trend inconsistent with high multiple valuations.
- Free cash flow appears artificially strong due to aggressive accrual of insurance reserves rather than actual claim payments, posing future cash flow risks.
Glancing through all the comments in one of the previous posts I noticed a generally positive sentiment about Uber on this sub. So I am genuinely wondering what people who are Uber bulls see that I am missing.
I research stock starrting from the “accounting side”. If the accounting fundamentals don’t make sense I skip going through the qualitative reasearch as that takes more time. In other words, I use the accounting fundamentals as a filter, and stocks that don’t pass the test, I don’t dig any deeper.
Now Uber…
Their PE is reported as 17-18 in most outlets, however they had a huge $6.6B one-time pre-tax benefit in Q3 2025 that severely inflates their earnings. When adjusted for that, their PE is \~40. Now, paying for PE of 40 would be okay for a fast growing company and growth investors, however their earning and margins have been going down substantially lately (I believe their earning are down 85% Y/Y Q1 2026, while the revenue is “only” up 18%. And I say “only” because for a PE of 40 you would expect at least 30% growth in revenue, and definitely not a declining earnings trend.
And you can’t look at their FCF because they had a bunch of failed equity investments that are degrading the company fundamentals. Uber is also accruing insurance reserves faster than they are paying the claims. None of these are showing up in the FCF, so the FCF looks pristine (today), but at the expense of future cash flows one all those claims come due.
So I don’t find Uber undervalued at all by traditional metrics, so what is there for Uber qualitatively to make it so popular in this sub?
Well for one, their operating income/EBITDA have gone from 0 in 2023 to over 6b today, with a clear path for more margin expansion over the coming years. Look at the charts for it, the operating leverage is very impressive. Using those metrics (not an exact representation of owner's earnings, but strips out a lot of accounting noise), you're looking at roughly a 25x multiple.
Also, 18% growth should absolutely command a 40 PE if that 18% revenue growth is durable for 5+ years to come and margins still have room to climb. People love to quote the PEG ratio without talking about the durability of that growth, and Uber has quite a bit of room to expand, especially in ads, delivery, and subscription.
I agree with everything you said. We could say it is fairly priced, but I wouldn’t call it a “bargain” which seems to be a sentiment here. Which we would probably agree on that high quality companies will rarely be at bargain prices anyhow. Just by PEG ratio, the price is somewhat similar to Google (same revenue growth, slightly lower PE). And it’s not like Google’s growth is less durable. Now, Google has huge CapEx at the moment, but it’s not like Uber doesn’t have its own challanges. Anyway, point being, price is a pretty reasonable price for the fundamentals at this moment.
Now what’s the forward PE?
Forward PEs are analyst estimates. As with most analyst estimates I don’t consider it much. It drives maybe 1% of my overall decision process. Because most analysts are people just like you and me, and their capability to predict the future is the same as ours. Also most of them are WSB regards too, that should tell you how much you need to trust that parameter.
Seriously? Many young companies are growing revenue and earning 100% a year.
Posted and recommended Uber a few times, though I've noted both bull and bear cases for it. But I have mentioned two things have gotten priced into it by the general market that just don't fit:
1) The constant narrative is autonomous vehicles are going to eventually kill the business. It operates on multiple bad assumptions IMO, including that what works for cities like San Fransisco works for the general U.S. and that local and state governments won't ever move to tax vehicles should they start intruding on gig workers and taxi companies. That is on top of the tech not being there yet, and the tech not being affordable enough yet for this doomsday scenario. The tech is years behind schedule in spite of the stock selling off with every headline.
2) Wall St. underestimates digital storefronts as a moat. Historically in fact it is one of the most commonly underestimated moats.
Now add these factors in with what is already mentioned about their operating income/EBITDA. Yes, you should call out the trailing P/E if anyone misquotes it, but I do think a good chunk of people are aware of that.
The counter-argument obviously is the PEG does not look enticing. It's healthy to keep this in mind for a bear case. But anything in a downtrend becomes very easy to find something wrong with and just dismiss it as a result. I also do note to anyone considering it that it at least for the moment looks like it may have another leg down as it has
I saw your reply below, and I do think it is very fair to say it is fairly priced more than dramatically underpriced. Which in this market... there isn't a ton that is even that. But even as I've recommended the stock, I have noted you could try to wait out a return to the monthly SMA200 as low $60s would be a very enticing entry point.
Thanks, this is more the kind of stuff I was looking for. Yeah I agree on the self-driving narrative being excessively pessimistic here. Also I believe they partnered with plenty of robotaxi companies (Waymo, Lucid, Rivian…), so it may actually help them in the long run.
What I don't get is why Uber will own the digital storefront. Google/Apple own the OS (agentic) layer and the intent layer (digital maps), they seem to sit on top of Uber.
Google and Apple can't really just bake a storefront into the OS without it violating anti-competitive laws. That's why Waymo has its own app and, in certain areas, partners with Uber to serve as the storefront.
Fy27 pe is 16
why can't you look at cash from operations? 10b on a 150b company = 15x cash flow AND top line gross profit is steadily growing AND they are the marketshare leader in ride hailing networks
if this isn't growth at a good price... what the F is?
Agreed that P/E is incredibly misleading - but as others have mentioned here the focus should really be on the operating income - and as a multiple EV/Op income would be preferable for me. No position in Uber but it’s clearly a cheap stock, the question is whether the moat is durable as competition is getting stronger in the Taxi space.
I've had a position with UBER since late 2024 when it hit $60. If it drops below $70 I'll add to it.
Waymo/AV disruption fears are still baked into the stock price but I see true disruption as unlikely. A large percentage of their income comes from rural areas AI can't possibly cover.
I'm in a similar position. Bought December 2024 and came close to selling so many times over the last few months but greed got the best of me, hoping it would climb back to the 90's. At this point, will likely exit when it gets across 80 or will be holding. Not doubling down at this point.
I still believe it will head back there eventually but I can't hazard a timeline.
You cannot prove a negative. Market is pricing in a major AI disruption, same as it is for SaaS and MSFT.
Disruption certainly is happening. We are adding jobs but those aren't software jobs those are nursing and hospitality jobs.
So calls…!
I’m looking longterm and if Waymo and other driverless taxi services keep rapidly growing Uber will be like “hitchhiking” to us nowadays.
People will think back and remember how weird it was that we were just so accepting of hoping in a stranger’s car.
Needless to say, Uber is not the market leader in Food delivery either or self-driving taxis. I’ll look elsewhere for a company that leads their industry.