UBER | SUPER DUPER BET

Ackman’s Big Bet: Will Uber’s AVs Drive Him to the Top or Off the Road?

Billionaire investor Bill Ackman has invested $2.3 billion in Uber, acquiring 30 million shares through his hedge fund, Pershing Square. He described Uber as a “highly profitable and cash-generating growth machine,” which helped push the stock higher and sparked lively debates among investors.

When it comes to Autonomous Vehicles (AVs), Uber’s investors are divided:

Bullish View: If ridesharing is a "winner takes-most" market, Uber’s dominance seems assured. With its vast network of drivers and AV partnerships, global reach, and an expanding Uber One subscription base, Uber is positioning itself like Amazon Prime for ridesharing. The company’s ability to bring together multiple services creates a competitive advantage that pure AV companies might struggle to replicate.

Bearish View: The arrival of Tesla’s robotaxi fleet could disrupt everything. Elon Musk has promised a fully autonomous Cybercab network that could undercut Uber’s cost structure. This model would be capital-light like Uber’s, but without driver expenses. If Tesla scales its AV fleet, Uber and its partners may lose their pricing power, damaging their core business.

Ackman’s large investment has sparked more pessimistic views on social media, with some suggesting Uber’s long-term value could collapse in a world of driverless vehicles. While this claim is bold, the situation is more complex, and the market seems to disagree with the Tesla optimists, especially over the past two months.

Uber and Tesla have just released their latest earnings reports, offering insights into each company’s plans.

Uber’s AV Strategy

MAPC (Monthly Active Platform Consumers): Users who completed a ride or delivery in the month.
Gross Bookings: Total spending by consumers on Uber apps, excluding tips.

Uber operates in three main areas:
-Mobility (Ridesharing): 52% of gross bookings
-Delivery** (food, groceries, etc): 46%
-Freight (Logistics): 3%

Uber profits by taking a share of gross bookings, and its asset-light model lets supply meet demand without requiring a massive fleet. Although switching costs are low, Uber benefits from strong brand power, scale, and network effects:
Supply: 17 million drivers and couriers in 2024
Demand: 171 million monthly users (up 14% YoY)

Now, Uber is applying the same model to AVs by partnering with AV companies that would struggle to scale on their own. This collaboration benefits all parties:
- AV companies get more usage and higher profitability.
- Uber increases gross profit, even with a smaller cut from AVs.
- Riders get lower prices due to a bigger supply of vehicles.

Uber’s Q4 FY24 Performance

Platform Growth
- Trips up 18% to 3.1 billion.
- MAPC up 14% to 171 million.
- Gross bookings grew 21% to $44 billion.

Revenue & Profitability
- Revenue increased 20% to $12 billion.
- Adjusted EBITDA grew to 4.2% of gross bookings.
- Free cash flow surged 122% to $1.7 billion.

Segment Performance
-Mobility: Up 24% in bookings, driven by growth in Uber for Teens (+50%) and premium offerings.
-Delivery: Grew 18%, crossing $20 billion, fueled by Uber One and grocery expansion.
-Freight: Flat due to macro challenges.

Key Takeaways

- Strong growth but profit miss: Adjusted EBITDA rose 44%, but operating income missed expectations due to legal/regulatory costs.
- Uber One membership surged 60% YoY, increasing engagement (members spend three times more).
- Expanding in suburban and international markets, with faster growth outside major cities.
- Partnerships expanding, like Delta Air Lines integration and Uber Shuttle in NYC.
- Stock buybacks continued, with $550 million repurchased in Q4 and a $1.5 billion repurchase program launched.

Guidance for Q1 FY25
-Gross Bookings expected to grow 17-21% YoY
-Adjusted EBITDA projected to rise 30-37%
- Challenges include currency headwinds and weather impacts in January

all in all The company is already achieving impressive results that support its current valuation autonomous vehicles are simply a way to secure Uber’s future and drive future earnings growth.
It's make sense to remain invested and take advantage of the recent upward momentum