Key insights
- The author argues Uber is overvalued due to a high P/E ratio and a disconnect with its forward PEG ratio, indicating the stock price is overextended relative to earnings growth. User growth is plateauing, and the shift to autonomous vehicles introduces new challenges. The author suggests the current valuation prices in unrealistic success, making the stock a potential valuation trap.
Disclosure: long 2925 of Uber @$77.76
Uber has a P/E of over 16, I think this is what Cramer was interested in. However, at its current valuation, Uber has a disconnect to it's FWD PEG ratio of 7. This signals that the stock price is drastically overextended relative to its actual earnings growth.
Growth in users has plateaued. Moving from 156 million monthly active users in 2024 to 200 million in 2025 was a significant leap, yet the expectation that 2026 will see growth is misplaced. Uber has effectively saturated its addressable market, hence why they didn't forecast their Monthly Active Users for this year. They will not see user growth as significant as their PEG suggests.
Furthermore, the pivot toward an autonomous vehicles is marketed as a cure-all for labor costs, but this transition likely replaces one set of friction with another. The current conflict regarding driver compensation does not disappear with automation; it merely shifts the power dynamic to autonomous vehicle partners. Uber’s reliance on third-party fleets means it will remain a middleman, squeezed between the high capital demands of hardware owners and the price sensitivity of a stagnant user base. By moving from human labor to robotic fleets, the company also moves toward a model where it may have to shoulder increased liability and maintenance costs that were previously externalized onto independent contractors.
Ultimately, an investment at these levels assumes a perfect execution of a technology shift that is still fraught with regulatory and technical hurdles. For a company with a P/E over 16 and a plateauing user count, there is almost no margin for error. The market is essentially pricing in years of aggressive success that the current trajectory of user growth simply cannot deliver. Under these conditions, the stock functions more as a valuation trap than a long-term opportunity.