Johan De Silva;333678 wrote:Rookie Investor;333674 wrote:Johan De Silva;333671 wrote:RR, once everyone has the App you have pricing power! Its not like the web. Raising prices recently with inflation has been very easy to do where I work, as a market leader the competitors follow, but back to Uber.... remember it has little or no costs impacted by inflation itself (unlike where I work), you can raise prices higher than the pay for drivers, especially when fuel cost is lower
I use a paid for service to look at the Financials in an easy way. If you don't have similar you can clearly see Net Debt (Total debt - cash) reducing by half thanks to the margin expansion unless they have had an equity raise and I am sure quickly looking they have not. This was all in very recent years.
That's the problem with looking at easy ways to look up numbers - the 22% margins you see is misleading because it seems to be calculated using the net income number and for 2024 it includes one-off large items such as tax rebate. You should look at the operating line which suggests an operating margin of 6%. It has doubled yoy owing to the operating leverage Uber has.
RE the pricing power lets see. Uber reports a gross booking figure, which is the total the passengers spend. The revenue line is what is passed onto Uber. Then they have their variable costs like insurance. The gross profit as a % of gross booking for 2024 is 16%. It was 10% the previous two years. How much can this really increase more? Uber drivers need to get paid and inflation is resulting in higher fuel costs and wages. Passengers are price sensitive to transport so they will always go for a cheaper option as there are like for like competitors and other transportation (private taxi companies etc).
They have no moat as such because people can switch to another app at 0 cost. As soon as a cheaper better app comes along, with one touch Uber is deleted.
Thank you for the direction, $1.3 billion of that from non-operation. I see the operating margin line increase 96.75% to 6.36%. It is all heading in the right direction if they double it again... while it is all dwarfed by the large market capitalisation so it is not something I would buy, but I tend never to buy US stocks.
RE inflation, that seemed positive for Uber as oil prices are declining not rising and the consumer expects inflation, they are even seeing it in pay rises and prepared to pay more. You only have to look at the insurers raising prices blaming repair costs yet they are making record profits.
RE app, we'll have to disagree, switching Apps has friction especially if you are out an about. If you use an App its habitual.
How does insurance work for Uber; does the driver pay or is it Uber? Bit confused because Uber have some insurance payments and reserves held back to pay for this in future. It is part of their variable costs not operating.
Fuel might not be rising but there is real wage growth, and from anecdotal evidence of using Uber, driver's are not particularly happy with their cut. So I can't see gross margins improving much. Remember taxi services are incredibly competitive and so I doubt Uber has pricing power to raise their prices much, even with real wage growth.
Operating margins can owing to the operating leverage, they seem to have invested well and turned a profit recently. So key thing is the growth in revenues now. I do not have any idea about this, as Uber has been around for a while but what is going to drive growth longer term?
I am sceptical about Uber's position when it comes to AV roll out in future. I can see them being irrelevant, why would a Tesla or Waymo needlessly pass their margins over? In the meanwhile they are useful for the demand, but not sure about future.
in any case, I was thinking of punting £5k in Uber in the dip, but it appears Bill Ackman beat me to it and did it for me anyway and given my 30k in PSH I now indirectly own £6k in Uber!!