When considering the ride-hailing industry, Uber Technologies is often the first company that comes to mind. This innovative app-based business has significantly disrupted the traditional taxicab industry and operates in over 70 countries, so much so that the company’s name is frequently used as a verb. Many investors are currently evaluating whether this growth stock is a buy, sell, or hold by 2025.
Uber has historically experienced strong business expansion. Over the past five years, the company’s revenue has increased by 212%, from $14.1 billion in 2019 to $44 billion in 2024. This substantial growth transpired amid the challenges of a pandemic, high inflation, rising interest rates, and ongoing economic uncertainty, demonstrating Uber’s resilience in overcoming various obstacles.
However, profitability and financial stability have been perennial challenges for Uber. This situation is improving, as evidenced by a transformation from an operating loss of $3.8 billion in 2021 to an operating income of $2.8 billion last year. Analysts on Wall Street are forecasting that this crucial profitability measure will grow at a compound annual rate of 55% between 2024 and 2027.
Uber faces notable competition, including rivals such as Lyft and DoorDash in the United States and several major competitors overseas. Nevertheless, Uber has achieved the scale necessary to assert its dominance. By December 31, Uber reported 171 million active users and $162.8 billion in gross bookings for the year. Uber currently holds a commanding 75% share of the U.S. ride-hailing market, according to Bloomberg Second Measure. Although it lags behind DoorDash, which held a 67% delivery market share in the U.S. in 2024, Uber has a unique advantage with both mobility and delivery services under one brand.
Investors should consider Uber’s network effect, a key competitive advantage. As more riders, drivers, and restaurants join the platform, it becomes more valuable to other users. For these participants, Uber is an essential app, providing transportation and delivery services, monetizing drivers’ free time, and generating incremental revenue for restaurants, despite any concerns about fees.
The potential impact of autonomous vehicle (AV) technology is a significant factor for investors to monitor. The greatest risk lies in the emergence of a successful robotaxi platform that offers cheaper rides. However, technical, regulatory, and consumer trust issues imply this remains a distant prospect. Uber recognizes the importance of a robust technological foundation and direct stakeholder relationships, facilitating numerous partnerships with AV developers.
Uber’s stock performance has been lackluster, with a 7% decline over the past 12 months as of April 10, underperforming the essentially stable Nasdaq Composite index. Since its initial public offering in May 2019, the stock has also trailed the broader index, a discouraging trend over a more extended period.
Nevertheless, Uber possesses characteristics indicative of a high-quality business, including growth, profitability, and network effects. The company’s management is proactively positioning Uber to capitalize on developments in AV technology.
Based on these factors, the stock is considered a strong buy, with investors able to acquire shares at a forward P/E ratio of 21.4, offering an attractive valuation for a leading company in its category.