Uber Stock Price Rally’s Post Earnings Dip

Uber's stock price (NYSE: UBER) has added ~20% off the recent earnings dip, following up a 7.5% drop as the numbers came through with a strong rally. One potential catalyst behind the turnaround is a swathe of analyst support, alongside that of investor Bill Ackman, the billionaire CEO of Pershing Square Capital Management.

Ackman's reputation is built on his success with cash-flowing consumer stocks, as evidenced by his 2016 investment in Chipotle Mexican Grill (NYSE: CMG) that saw a roughly 600% return.

Whilst Ackman initiated his investment in Uber in early January, acquiring an impressive 30.3 million shares, the move was made public on Friday, fuelling the bulls. Ackman attributed his investment confidence to the leadership of Uber's CEO, Dara Khosrowshahi, citing his role in transforming Uber into a profitable and cash-generating powerhouse.

With gains of 21.81% year-to-date for the stock, plenty of positivity has returned since the Q4 reversal. Uber's stock price lost ~30% from October's high through to the close of the year, with many seeing Tesla's gain coming at the expense of Uber.

Interestingly now that Tesla is down 13.39% year-to-date that Uber is seeing a return to green. Whether the trend of Tesla/Uber trading inverse to one another will continue is yet to be seen, but for the time being, it seems to be holding.

Despite Uber’s challenging history, the company achieved profitability in 2023, with further enhancements by 2024. Specifically, Uber reported a gross booking growth of 18% in 2024, totalling $162.8 billion, with revenues reaching $44 billion. By the end of 2024, Uber's GAAP operating income stood at $2.8 billion, complimented by approximated free cash flow nearly reaching $7 billion.

Uber’s solid financial performance has not overshadowed the risks, particularly in the arena of autonomous vehicles. The firm has established partnerships with key players like Waymo, Volvo, and Nuro to integrate autonomous driving technology into its network. Such developments, while potentially revolutionary, introduce competitive and technological risks.

Ackman has emphasised that Uber shares are trading at a substantial discount against their intrinsic value, describing Uber as one of the world's best-managed businesses.