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Why Uber’s Cheap Stock Deserves a Second Look Despite Its Spending Spree

Uber has always been a hot topic. Is it the rideshare game-changer everyone talks about, or just another tech giant burning cash with no end in sight? Even in 2024, that debate hasn’t settled. But here’s the kicker: Uber’s stock is surprisingly cheap right now, and its big spending might actually be part of the story worth paying attention to.

I get it—investors tend to avoid companies that don’t fit the neat “profitable and conservative” box. Uber definitely doesn’t. The company is still pouring money into growth, customer incentives, and expanding its reach beyond rideshare into areas like Uber Eats and freight. Valuing a business that’s constantly growing can be tricky, but that’s often where the biggest opportunities hide.

The Real Deal Behind Uber’s Spending

Let’s be honest: Uber spends a lot. From marketing campaigns to driver and rider incentives, tech infrastructure, and international expansion, the bills add up fast. Many are quick to point to Uber’s negative net income and say, “How is this a good deal?”

But not every dollar Uber spends is throwing money down the drain. A large portion is what savvy investors call “growth capex”—investments aimed at paying off down the road. Uber isn’t just wasting cash; it’s building a logistics platform that could one day support everything from groceries to package deliveries.

That said, it’s not all smooth sailing. Uber has had its share of costly missteps, especially in places like India and China where it eventually pulled out. But compared to years past, the company’s spending feels more strategic and focused. It’s shifting from reckless cash burn to calculated investment—and that’s a big deal.

Why Uber’s Stock Looks Like a Steal

Take a quick look at Uber’s price-to-sales (P/S) ratio: it’s just under 3x. That’s pretty cheap when you stack it up against competitors. DoorDash is around 5x, and remember, Amazon’s early growth years came with much higher multiples. Even better, Uber is now generating positive free cash flow—over $600 million in Q1 2024 alone. That’s a milestone that gets overlooked because of Uber’s “always losing money” reputation.

Investors tend to get jittery when a company keeps spending heavily. But they might be missing the bigger picture. Uber’s revenues are still growing at a solid 15% year-over-year. Its rideshare business is turning a profit on an adjusted EBITDA basis. Uber Eats is holding strong against DoorDash, and international markets are finally chipping in for real.

I’ve seen this pattern before: Wall Street fixates on short-term losses and misses when a company pivots to sustainable profits. Uber’s cost control is improving, and its key markets—like the US, UK, and Australia—are now making money. This isn’t the Uber of a few years ago.

The Hidden Value Uber Brings

It’s easy to think of Uber as just a rideshare company. But that’s selling it short. The platform it’s building—its logistics network, driver base, and loyal customers—gives Uber a lot of optionality to expand into new areas. We saw this during the pandemic when rides slowed but Uber Eats took off almost overnight.

“Optionality” might sound like jargon, but it’s just the chance for a company to unlock fresh revenue streams using what it already has. Uber’s got potential moves into healthcare transportation, autonomous vehicles, even fintech. Not all will pan out, but the market often underestimates the value in just one or two of these hitting big.

Where Things Could Go Wrong

Of course, Uber isn’t a sure thing. Two big risks stand out.

1. Regulatory Pressure: Governments are cracking down on gig work. If Uber has to treat drivers as employees everywhere, costs would shoot up and the whole business model could be shaken. Ongoing labor lawsuits in places like California and Europe are a constant threat.
2. Competition: While Uber dominates in the US and a few other countries, local rivals are fierce elsewhere. Ola in India, Didi in South America—they make growth tough. Uber’s shown it’s willing to exit markets rather than bleed money, but that limits its global footprint. Plus, there’s always the chance a newer, cheaper model disrupts Uber just like it did to traditional taxis.

What Smart Investors Are Watching

The best investors don’t obsess over quarterly margins. Instead, they look at “unit economics” and market share. Uber’s take rate—the cut it keeps per ride or delivery—is climbing. Customers are sticking around. And Uber’s ability to bundle multiple services in one app creates loyalty that’s hard to match.

It’s all about network effects: riders attract drivers, and drivers attract riders. This flywheel gives Uber a durable edge where it matters most. That’s why its financials are improving even with heavy spending. It’s a nuance that skeptics often miss.

So, Should You Buy Uber Stock?

I’m not here to say “buy, buy, buy.” But if you’ve dismissed Uber as just another cash-burning tech story, it’s worth taking another look. The market’s still pricing in a lot of doubt about Uber’s spending, while ignoring its progress on cash flow and the real value of its growing platform.

Of course, if regulators come down hard or Uber dives into more losing markets, the upside could evaporate. But if the company keeps its spending in check and executes on its platform’s potential, today’s low stock price might look like a steal a few years from now.

Uber isn’t for everyone, but the mix of a beaten-down valuation, improving profitability, and untapped optionality makes it one of the more interesting plays out there.

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