Uber: A platform not fully appreciated

Uber (UBER):Uber is no different from other consumer cyclicals, if consumer demand goes down due to a multitude of macro factors, then EBITDA and revenue growth expectations are also going down, probably by a lot.

• For example, we estimate EBITDA ~20% below the street in our upside scenario. We are about 50% below street EBITDA estimates in our downside scenario.

Good enough reason to ignore Uber? Only that is already what everyone believes, and we think it is largely reflected in the stock, at least on a 3 year view.

• Why is the market so distrustful? Lack of FCF, promise of jam tomorrow seems a stretch, plus Uber has to maximise returns from a more complex equation than other similar businesses and the market is not fully convinced.

We are convinced of the financial attractiveness of the Uber platform. Two years from now Uber could be a very different company in terms of margins and have a more certain growth profile.

• Over the last few quarters, we think Uber has clearly demonstrated that it can make the driver/consumer equation work despite severe driver shortages and high oil prices.

• We believe that Uber will generate ~$4b FCF but our best case is 2025 rather than 2024 as management is guiding.

Potential Upside: $48 (+82%) Sensible Downside: $21 (-26%)

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