This article first appeared on GuruFocus.
Uber Technologies (NYSE:UBER), the global ride-hailing and delivery giant, dropped 4.8% on Wednesday after investors zeroed in on softer-than-expected third-quarter earnings guidance, brushing aside another quarter of solid operating growth. Management forecast adjusted earnings of $0.84 to $0.88 per share, missing Wall Street’s $0.89 target. Uber also turned up the heat in the robotaxi race, unveiling plans to invest more than $10 billion over the next several years across autonomous-driving partners, fleet operations and vehicle commitments.
Chief Executive Dara Khosrowshahi made it clear Uber isn’t betting on a single winner. The company plans to keep expanding its partnership with Alphabet’s Waymo in Austin and Atlanta while adding more autonomous-driving developers to its platform. That strategy comes just weeks after Uber struck a $14.8 billion deal to acquire Delivery Hero, giving investors another reason to scrutinize capital allocation. Third-quarter gross bookings are expected to reach between $58.25 billion and $60.25 billion, largely in line with the $59.21 billion consensus, although currency headwinds are expected to shave roughly one percentage point off reported growth.
The core business is still firing on all cylinders. Second-quarter gross bookings jumped 24% to $58.02 billion, beating expectations by nearly $1 billion. Revenue climbed 12% to $14.19 billion, even though it came in slightly below analyst estimates, while World Cup travel demand gave mobility and delivery activity another boost. The real question isn’t whether Uber can keep growing. It’s whether management can pour billions into autonomous vehicles and absorb a blockbuster acquisition without sacrificing the financial discipline that investors have only recently started to reward.
The GF Value chart tells an interesting story. With the stock trading at $67.14 versus a GF Value estimate of $97.60, Uber sits about 31% below its estimated fair value. The market appears to be discounting the risks tied to heavy robotaxi spending and near-term margin pressure. If those investments strengthen Uber’s competitive moat instead of weighing on returns, today’s valuation could look far more attractive in hindsight.