Are robotaxis and autonomous vehicles (AVs) just hype, or are they a real threat to Uber’s (UBER) future? The mobility tech company has shed 30% from its October 2024 peak while investor aspirations about Uber’s future success begin to fade. The fear is that fleets of robotaxis will gazump Uber from of its urban mobility roost. Moreover, Uber investors are probably worried about Google’s autonomous driving solution, Waymo, which announced plans to launch self-driving vehicles in Miami by 2026. Another rival, Lyft, plans to do the same in Dallas. Just like futuristic Hollywood movies predicted years ago, robotaxis are coming.
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Most Wall Street analysts believe these concerns are overblown, as fully autonomous robotaxis aren’t widely available just yet. However, 2025 is set to mark their arrival. If Tesla (TSLA) leads the charge in this niche, Uber’s position in urban mobility will be further undermined. Moreover, while decent, Uber’s Q4 results didn’t impress when it came to growth or the outlook for 2025.
Then there’s the issue of valuation. Uber trades at a significant premium compared to its competitors, which poses a risk given current market conditions. Despite Wall Street’s bullish outlook on this stock, I’m taking a bearish stance. I believe Uber will struggle to outperform the market this year, especially as larger AV companies take the lead.
Uber’s Q4 Results and Soft 2025 Forecast
Despite the initial bearish reaction after earnings, with shares dropping 7.5%, Uber’s stock has bounced back, suggesting the market has digested the news and considers Uber’s misstep a one-off. On the face of it, this is true. Uber has only missed one quarterly earnings estimate since the start of 2023.
However, looking closer, I still can’t make a strong bullish case for the results the ride-sharing giant reported. The main issue with Uber’s recent performance centers around its guidance for Q1. The company is forecasting just 19% growth in gross bookings, which would translate to between $42 billion and $43.5 billion in bookings for the first quarter. This is below the $44.2 billion the company reported in Q4 2024. Moreover, $6.4 billion out of the $6.9 billion reported in the company’s net quarterly income came from a tax valuation benefit.
While there’s a sequential decline in revenue, there is a year-over-year increase, which isn’t unusual as Uber’s first quarter is typically slower than Q4. Still, the weak forecast has investors worried about the company’s future prospects. The big question is: why is Uber’s management projecting such low growth in gross bookings—just 19% year-over-year? There seems to be a disconnect between the numbers and the promoted narrative.
CEO Dara Khosrowshahi declared in the earnings call that “the theme of this quarter is acceleration.” But, looking at the actual Q4 numbers, it seems more like steady growth, with no apparent acceleration in gross bookings, revenues, or trips.
UBER’s Autonomous Vehicle Challenge
If Uber’s recent results aren’t enough to turn investors bearish on the stock, then broader industry trends just might. Much of the long-term skepticism surrounding Uber’s future comes down to how the company will handle the rise of AVs. Take Tesla’s Robotaxi project, for example, where Elon Musk has described it as a hybrid between Airbnb and Uber. Tesla plans to own and operate a fleet of autonomous vehicles while selling them to private individuals who want to run their own robotaxis.
It’s interesting to note that as Tesla has made progress with its robotaxi project, Uber’s shares have declined as the two tech giants have decoupled in stock price performance.
Uber has directly addressed the issue, clarifying that the company isn’t just watching innovation happen but is actively working to stay relevant in the AV market. In the most recent earnings call, Khosrowshahi stressed that Uber plans to make AVs commercially viable: “Uber can deliver the lowest operational costs for our AV partners because we are leaps and bounds ahead on every aspect of the go-to-market capabilities that are critical to commercialization.”
Personally, I don’t think AVs will fully replace Uber’s services. However, I believe the company will be impacted if AVs become widely available, especially during peak demand times when private vehicle rides might decrease. AV makers, like Tesla, will need Uber’s 170 million monthly active users to fill that demand. And if Uber doesn’t innovate or adapt fast enough, many users could shift to alternative AV services.
Uber’s Premium Valuation May Be Too High
As the leader in the ride-sharing industry, Uber stock should arguably trade at a premium compared to its peers. But since Uber has only recently become profitable, and many of its competitors, such as DoorDash (DASH) and Lyft (LYFT), are still prioritizing growth over profitability, it makes more sense to compare them using EV/EBITDA and price-to-cash flow metrics.
Uber is currently trading at a forward EV/EBITDA of 19x, about 60% higher than the industry average. Regarding cash flow, the company trades at 21x, a 54% premium versus the industry average.
Uber’s 2025 guidance suggests the company won’t be accelerating its top-line growth more aggressively anytime soon. With some uncertainty around its role in the future of autonomous vehicles, I think the stock shouldn’t be trading at such a significant premium compared to the industry.
What is the Price Target for UBER in 2025?
On Wall Street, UBER stock carries a Strong Buy consensus rating based on 34 Buy, two Hold, and zero Sell ratings over the past three months. UBER’s average price target of $90.97 per share implies a 17% upside potential compared to current levels.
Uber’s Valuation Looks Risky as Robotaxi Competition Heats Up
Uber is far from a problematic company. In fact, its fundamentals are probably in the best shape they’ve ever been in, and this may explain analyst’s bullishness toward the stock. The issue lies with its future. While FY2025 guidance came in a bit soft, I don’t think Uber will find enough commercial runway over the next few years, especially with autonomous vehicles potentially changing the ride-sharing industry. Uber’s services will still be important for the new AV cycle regarding commercial viability, but it’s unclear how that will shape its future.
With a valuation that’s far from cheap compared to its peers, I believe Uber is likely to underperform the broader market, especially as investors shift focus to AV trends in 2025. Uber’s entire brand speaks toward technology and apps, whereas brands like Tesla and Lyft speak toward technological engineering. Both industries need each other to prosper, but ultimately, it is likely to be the engineering side that reaps the lion’s share of the harvest once robotaxi technology is introduced and monetized.
