Key insights
- The author argues Uber is undervalued based on a Warren Buffett-style valuation, discounting future growth and treating it as a perpetual bond. The analysis suggests Uber's current market cap is significantly below its intrinsic value, even without considering future growth potential. The author believes Uber's network and gig economy model will allow it to thrive even with commoditized autonomous vehicle technology, making it an attractive investment.
I think the current fears of AV eroding Uber's market share are making it very cheap right now. To illustrate my point, I will value it using the same methodology Warren Buffett used to value The Washington Post.
First, we take Uber's Owners' Earnings for 2025:
(Net Income + Depreciation/Amortisation - CapEx)
Net Income: $10.05B Depreciation/Amortisation: $719m CapEx = $336m
= $10.433B
divided by the 30 year Treasury yield at 4.90%
= $212.92B
Uber's current market cap = $160B.
This basically treats Uber as if it pays the same cash flows for the rest of its lifetime (like a bond), and assumes that the business has ZERO growth for next year, the year after and so forth. Basically, this valuation highlights that if the business never grew again, it would still be more attractive vs. bond yields.
As for the business model, I think we will reach a point where AV becomes a commodity. Nobody will care whether they're riding on a Waymo, Teslacab, Zook, etc. - people only care about price, and Uber is poised to take advantage of this with their massive network & gig economy capabilities.
Thoughts?