UBER - Uber Technologies

[SharperDingaan]

Re Uber Eats.

It's not popularity (of course delivery is popular); it's cost versus just walking down the street, and can the diner pay for it.

Using an Uber to get to the restaurant also earns a lot less than the 30% of the total food bill.

Take out students, & those with kids/mortgage, & who's left? with ability to pay?

 

I put it to you that this is really just a 'cool' tech solution, aimed at other techs, looking for a market.

And that it can't compete against existing delivery options; pizza delivery, grocery delivery, food trucks down the street.

 

Not a problem, so long as Uber applies the industry's agile project management approach.

Try it, and kill it, as soon as it's no longer fit for purpose.

 

SD

 

 

[DTEJD1997]

hey all:

 

Here in my area, Uber Eats and DoorDash are making big marketing efforts.

 

The crazy thing is this...they are HEAVILY promoting Wendy's, Taco Bell and other low cost eateries. 

 

Who the $#%@% is going to order 3 Tacos and a nachos from Taco Bell to be delivered?  Somebody too stoned/drunk to walk/drive?  Who would want Taco Bell delivered?  NOT ME!  On the rare circumstance when I wish to eat Taco Bell, I want it NOW.  I will eat in my car or the dining room of the restaurant.  A hard shelled taco from Taco Bell has a half-life of a few minutes.  After that, the grease has soaked the shell and it goes from hard shelled to soft shell and is thus ruined.

 

Wendy's and other burger joints are not quite as bad...you can bring those back home or to the office, but your still working with minutes before the fries get too cold.

 

Where is the $$$$ though?  We are talking about $5 to $10 meals here.

 

I also thought that a cloud kitchen is a really cool idea.  It really depends on the area that you are in.  I know a restaurant owner and was discussing this with him.  He said that for most of his location, rent is not really an issue.  His best location pays it's rent bill with just over 1 day of sales.  How much would he save by moving to a lower priced cloud kitchen? 

 

I suppose you might make it work with 5+ different concepts going out of one kitchen....but I think the cloud kitchen might really only work in NYC, SF, or other very high rent areas?  Here in the Detroit area, real estate is cheap, and we've got PLENTY of it.

[Deepdive]

You think you're under estimating the craving for Taco Bell when you're stoned

[SharperDingaan]

You think you're under estimating the craving for Taco Bell when you're stoned

 

The Toronto experience is that it's a lot smarter to just hire a delivery driver (same as a Domino's), and call it 'Stoner Eats'!

Grocery stores will even pack your groceries; and deliver to your condo, or door, by a pre-set time (Friday Night); at the same price as in the store, plus $5-$10 for delivery.

 

Gives an indication as to just how out of touch some of the Uber business actually is.

For which you paid a multiple of how much?

 

SD

 

[Guest ajc]

 

 

Re Uber Eats.

It's not popularity (of course delivery is popular); it's cost versus just walking down the street, and can the diner pay for it.

Using an Uber to get to the restaurant also earns a lot less than the 30% of the total food bill.

Take out students, & those with kids/mortgage, & who's left? with ability to pay?

 

I put it to you that this is really just a 'cool' tech solution, aimed at other techs, looking for a market.

And that it can't compete against existing delivery options; pizza delivery, grocery delivery, food trucks down the street.

 

Not a problem, so long as Uber applies the industry's agile project management approach.

Try it, and kill it, as soon as it's no longer fit for purpose.

 

SD

 

 

 

Time will tell, I'm clearly on the other side of that bet. Faasos has already made the cloud kitchen business model work and gained share in India for over a decade (see this Financial Times article on the topic - https://www.ft.com/content/5c104e5e-7aea-11e9-8b5c-33d0560f039c).

The developed world tends to have higher delivery costs. In rich cities though, working out of a warehouse/factory district can bring rent down a whole lot. Second, mechanizing your line can end up being cheaper than paying staff wages year after year after year. Also, you produce far more food and do it quicker. Serving 10 000 meals per night instead of 500 means you can bring down the price of the meal and make it up on volume.

Plus, working with so much food means you're able to secure discounts with your suppliers because of how much you buy. Platforms like Uber Eats also give far more insight into demand on every level, so intelligent use of that can reduce spoilage and increase savings.

 

When you factor in the idea that most Americans in important, growing cities probably don't like being limited to the 10 or 20 restaurants within a five minute walk and instead prefer to have access to 1000's of them from anywhere in the urban environment, then there's still a very big role for Uber Eats, Doordash, etc, to play in consumer's lives.

Also, with the introduction of electric bicycles it means couriers can travel faster and deliver more at even lower cost so delivery fees can effectively fall.

Then there are innovations like what Starship Technologies is working on where delivery robots on wheels keep your meal at the perfect temperature and you don't need to pay a human courier a wage (https://venturebeat.com/2019/03/25/starship-technologies-rolls-out-delivery-robots-to-northern-arizona-universitys-flagstaff-campus/). Drone delivery may play some kind of small role too, eventually.

 

Overall with the various economies of scale and cost savings outlined above I don't think it's unimaginable that, in a few years as cloud kitchen technology and efficiency management improve, a situation develops where even with delivery you're only paying an extra 3 or 4 bucks for your meal.

In return for that small fee you get selection from across the whole city and can carry on sitting in your beanbag chair eating Cheetos while it's brought to you.

My guess is most urbanites will see that as a reasonable trade-off, if not all the time, then at least for a good part of it.

For the curious, this slightly longer, more in-depth read on cloud kitchen's from 2017 was an interesting one - https://www.ft.com/content/d23c44fe-4b0b-11e7-919a-1e14ce4af89b.

 

 

 

[SharperDingaan]

 

 

Re Uber Eats.

It's not popularity (of course delivery is popular); it's cost versus just walking down the street, and can the diner pay for it.

Using an Uber to get to the restaurant also earns a lot less than the 30% of the total food bill.

Take out students, & those with kids/mortgage, & who's left? with ability to pay?

 

I put it to you that this is really just a 'cool' tech solution, aimed at other techs, looking for a market.

And that it can't compete against existing delivery options; pizza delivery, grocery delivery, food trucks down the street.

 

Not a problem, so long as Uber applies the industry's agile project management approach.

Try it, and kill it, as soon as it's no longer fit for purpose.

 

SD

 

 

 

Time will tell, I'm clearly on the other side of that bet. Faasos has already made the cloud kitchen business model work and gained share in India for over a decade (see this Financial Times article on the topic - https://www.ft.com/content/5c104e5e-7aea-11e9-8b5c-33d0560f039c).

The developed world tends to have higher delivery costs. In rich cities though, working out of a warehouse/factory district can bring rent down a whole lot. Second, mechanizing your line can end up being cheaper than paying staff wages year after year after year. Also, you produce far more food and do it quicker. Serving 10 000 meals per night instead of 500 means you can bring down the price of the meal and make it up on volume.

Plus, working with so much food means you're able to secure discounts with your suppliers because of how much you buy. Platforms like Uber Eats also give far more insight into demand on every level, so intelligent use of that can reduce spoilage and increase savings.

 

When you factor in the idea that most Americans in important, growing cities probably don't like being limited to the 10 or 20 restaurants within a five minute walk and instead prefer to have access to 1000's of them from anywhere in the urban environment, then there's still a very big role for Uber Eats, Doordash, etc, to play in consumer's lives.

Also, with the introduction of electric bicycles it means couriers can travel faster and deliver more at even lower cost so delivery fees can effectively fall.

Then there are innovations like what Starship Technologies is working on where delivery robots on wheels keep your meal at the perfect temperature and you don't need to pay a human courier a wage (https://venturebeat.com/2019/03/25/starship-technologies-rolls-out-delivery-robots-to-northern-arizona-universitys-flagstaff-campus/). Drone delivery may play some kind of small role too, eventually.

 

Overall with the various economies of scale and cost savings outlined above I don't think it's unimaginable that, in a few years as cloud kitchen technology and efficiency management improve, a situation develops where even with delivery you're only paying an extra 3 or 4 bucks for your meal.

In return for that small fee you get selection from across the whole city and can carry on sitting in your beanbag chair eating Cheetos while it's brought to you.

My guess is most urbanites will see that as a reasonable trade-off, if not all the time, then at least for a good part of it.

For the curious, this slightly longer, more in-depth read on cloud kitchen's from 2017 was an interesting one - https://www.ft.com/content/d23c44fe-4b0b-11e7-919a-1e14ce4af89b.

 

I hear the story, but there are a lot of holes

 

Were the Indian experience representative of the BRICS we would see similar results in the other BRICS, yet we don't.

What we see is that it is very situational, and largely contained to very specific markets/demographics.

 

Food isn't widgets.

Nobody cooks meals on speculation, the product has a very short shelf-life, if you're not selling you're not buying (no discounts), mechanization just drives up your break-even, and if you're selling well in particular areas - it's only until the street vendors move their carts there. No business; no couriers, no drones, no robots, no future years of improvement.

 

Add new markets faster than problems show up, & it looks like a great business.

Until you run out of new markets ....

 

I would suggest that in most bigger cities there actually IS a small market for this, of which Uber Eats may capture a small %.

Hence Uber Eats is essentially a diversifed taxi dispatcher with high operating leverage, that is paid by variable fee; indeed worth something, but nowhere near the current multiples.

 

SD

 

 

[gfp]

Tourists order UberEats quite a bit when they stay at our AirBnBs in New Orleans.  If you are from out of town, you don't know how to navigate the traditional delivery options and most of these folks don't rent a car.  Hell, some of them don't even know the address or the neighborhood name of where they are staying.  But the blue dot on their phone does.  And they can have fried seafood, burgers, whatever they want at the door at 2am without wandering the mean streets of Nola in the dark.  Its very popular.

 

My son blew through a $200 UberEats gift card that Grandma gave him for graduation in like 4 days with his friends. (granted, they are students and stoners, a well documented use case).

 

So these tourists go everywhere in ride shares (several per day), get their late night meals delivered by UberEats, ride around on Uber-owned bike share 'blue bikes' and stay in AirBnBs.  And some of them book "airbnb experiences," which are like uber for part time tour guides.

[Guest ajc]

 

@SharperDingaan

I see it a little differently, for sure. As I calculated in my original post at the very top of this thread, I don't think the multiple being paid right now for Uber, Eats, Jump, Freight, and their overseas stakes in Didi, Grab, and Yandex, is demanding.

Rebel Foods (owner of Faasos cloud kitchens, the successful Indian business mentioned in that article) are now expanding that concept to Dubai and Indonesia, and thereafter the rest of ASEAN (https://www.livemint.com/companies/start-ups/coatue-may-lead-120-mn-funding-in-faasos-parent-1558288535110.html). They will also be mechanizing their production lines in order to lower labor costs and speed up output. Furthermore, Rappi which is South America's fastest growing bicycle/moped courier service built on food delivery mainly, has recently hired Sebastian Solanilla (https://www.linkedin.com/in/sebassolanilla?originalSubdomain=co) to work on building over 100 cloud kitchens around Latin America.

 

In China, on-demand food-delivery led by Meituan and Ele.me is already a more than $40b market (https://techwireasia.com/2017/07/technology-demand-food-delivery-platforms-can-drive-chinas-thriving-dining-culture/). Both of those companies are using cloud kitchens more and more (see this excellent article from the Economic Times - https://economictimes.indiatimes.com/small-biz/startups/newsbuzz/indias-online-food-aggregators-are-taking-lessons-from-china/articleshow/63740650.cms?from=mdr).

 

Some reasons I think Faasos got their first-ish was because India has very high urban population density, cheap and economical-to-run mopeds everywhere, a cultural history of delivery (https://en.wikipedia.org/wiki/Dabbawala), and increasingly low data costs because of what Jio has done in telecoms. Also, I noticed in Delhi when I was there that property costs in busy areas with lots of shops, restaurants, etc, were very high compared to less built-up places only a few miles away. Plus, Faasos kind of tripped into the situation through failing at the restaurant business so luck smiled on them.

In other words, I think India had an almost perfect confluence of factors that favored the Faasos model there but it's true that China, ASEAN, and places like South Asia, West Africa, and other urban environments globally have many of these same variables at play. This probably explains why we're seeing expansion into those geographies.

 

Anyway, reasonable people can clearly agree to disagree. I do see this taking longer to play out in the US than in India or China, but my sense after watching this space for a while is that this is happening and won't be stopped. My perspective is that in the same way McDonalds essentially industrialized the 1960's restaurant business through limited products made quickly on a production line system in a scientifically-rigorous way with extreme focus on cost and operational efficiency (for curious readers, Behind The Arches is a book that explains this well and in great detail - https://www.amazon.com/McDonalds-Behind-John-F-Love/dp/0553347594), so fully-mechanized cloud kitchens and urban on-demand delivery will eventually revolutionize today's restaurant market. We're still very early on technology-wise so right now the innovations are still on the low-hanging fruit-picking side, but give it between 5 to 10 years and I think we'll likely see this taking a big chunk of share away from cooking at home or eating out. My two cents.

 

 

@gfp

 

Great points. I think it was Bill Gurley that described the modern cell phone as a remote control for your life. Press a button, and you can watch what you like, speak to who you like, order a ride, food, whatever. To my mind, this is still something most folks probably haven't wrapped their heads around. I think a fair amount of it is simply generational change.

 

People under 35, and numerous ones over, are at this point almost hard-wired to expect certain things on-demand. Millenials especially. The idea that they would have to manually get stuff is basically crazy. Take Uber in the US for example... 37% of users are in the 16 to 24 age group and another 28% are aged 25 to 34. Essentially, two thirds of their users come from this demographic. I don't have the numbers in front of me, but my guess is Uber Eats, Airbnb, Netflix, etc, all skew similarly.

 

I think this generation has also done more backpacking around Asia/Europe/South America, or flying to national or international sports fixtures, concerts, etc, now that the budget flying revolution (Jet Blue, Air Asia, Ryan Air, Norwegian, and so on) has taken place over the past decade. They're also more likely to have gone to college and done so in another state, where they met friends who they now visit from all over. Said differently, there has never been another generation that has had access to so much cheap and frequent global and nationwide travel, and I think that dovetails very well with the point you made about people not understanding other cities but understanding very well what their phone and apps are capable of.

 

I think the cases you mentioned all just reinforce that between using the phone as a remote control for their daily lives and having the GPS right in there for location-specific services, there's kind of a new paradigm emerging (where clearly it's still very important for value investors to only pay reasonable multiples) which is upending old ways of navigating the world and chances are there will at least be a handful of companies in a number of these spaces that end up being solid long-term investments. Obviously I happen to think for now that Uber may well end up being one of them.

 

 

 

[LongTermView]

I'm long uber but some of these numbers are confusing.

 

So this is what we say about car expenses in the context of net driver pay:

 

 

I'd highlight that unlike the IRS which pegs total driving costs at 55 cents/mile for 2018, the AAA has them at 37 cents/mile for small sedans, so there's reasonable debate about what expenses really are.

 

 

But in the Personal Mobility section of the S-1 part of the story is that the addressable market is large because using Uber can make more sense than car ownership. The Cost per mile section on page 173 says the following:

The American Automobile Association estimates the average cost of owning and operating an automobile in the United States in 2018 at 75 cents per mile.

 

I guess there is some justification for using different numbers in different spots if a guy takes uber rides in a prius as opposed to owning a big truck. Where does AAA break things out such that we see 37 cents for small sedans and 75 cents for other vehicles?

 

[Guest ajc]

 

 

I'm long uber but some of these numbers are confusing.

 

I guess there is some justification for using different numbers in different spots if a guy takes uber rides in a prius as opposed to owning a big truck. Where does AAA break things out such that we see 37 cents for small sedans and 75 cents for other vehicles?

 

 

 

I don't see 75 cents in the breakdown below, but there's a difference between small sedans (37 cents) and medium SUVs here (55 cents). Perhaps large SUVs and trucks are closer to the 75 cent mark. I'm not sure.

 

https://www.ridester.com/uber-lyft-driver-costs-and-expenses/

 

 

 

[Guest ajc]

 

 

 

I'm long uber but some of these numbers are confusing.

 

I guess there is some justification for using different numbers in different spots if a guy takes uber rides in a prius as opposed to owning a big truck. Where does AAA break things out such that we see 37 cents for small sedans and 75 cents for other vehicles?

 

 

 

I don't see 75 cents in the breakdown below, but there's a difference between small sedans (37 cents) and medium SUVs here (55 cents). Perhaps large SUVs and trucks are closer to the 75 cent mark. I'm not sure.

 

https://www.ridester.com/uber-lyft-driver-costs-and-expenses/

 

 

 

Okay, I figured it out. If you click that link but look at the 10 000 total miles per year category then you get in the 75 cents range. Once you go to the 20 000 total miles per year and over category, you get far lower costs.

Individual car owners clearly drive far fewer miles per day on average than full-time Uber drivers.

 

 

 

[LongTermView]

 

Okay, I figured it out. If you click that link but look at the 10 000 total miles per year category then you get in the 75 cents range. Once you go to the 20 000 total miles per year and over category, you get far lower costs.

 

 

Right, that makes sense.

[Guest ajc]

 

Earnings slides - https://s23.q4cdn.com/407969754/files/doc_financials/2019/Q1/Q1-2019-supplemental-slides.pdf

 

Earnings call - https://investor.uber.com/news-events/default.aspx

 

The call was roughly in line with what I was expecting. Uber has said from now they expect to decrease incentives and discounts going forward. Eats growth was impressive, my thinking is it'll eventually be the second player in the US food-delivery market after Doordash and this will reinforce driver and rider loyalty to the platform because of the increased optionality it offers.

 

Related to that, the emphasis placed in the beginning of the call and the Q&A on loyalty programs for both drivers and riders makes it seem like the thesis I outlined before in this thread is starting to play out. Looks like they are strongly focusing on rewards, subscription, and cross-selling to keep people using the Uber platform over any alternatives and this sounds like it is already increasing loyalty and purchases in their early US tests. What was said about Eats take rates improving from now on was good to hear, and it's great how they're able to use their huge cash reserves to help give them an advantage in growing their India Eats business at a rate that gives them a real chance of being a top two food-delivery player there. Uber Cash is another interesting notable, given that there's a small chance it could potentially lead them down the WePay or AliPay route, to at least a minor extent over time.

 

Still seems they have more than enough cash to last for a long time provided they stick to their previously mentioned goal of reducing losses, becoming cash flow self-sustaining and then finally reaching profitability. I did lighten my position a little when it went up into the 40's for a quick 10% gain. I'm still pretty bearish about the overall environment based on this new wave of tech IPO valuations, as I wrote about before (https://twitter.com/tonyjclayton/status/1118205158721249280), so I don't want this to be too big of a position right now and have been maintaining a very large cash holding in my portfolio for the past month and a half. Overall, I still think Uber is a pretty good long-term value at these prices though and worth having some kind of toehold stake in, even if I can easily imagine this entire hot, new IPO sector falling sooner rather than later and offering improved buying opportunities.

 

 

 

[DTEJD1997]

hey all:

 

UBER trading where it does should be a CLEAR indication that we are AT or nearing a market top.  That there is not more discussion of do they even HAVE a viable business model is yet another.

 

They have about 8BB of cash in the bank.  The company can't run on a zero balance, so they might need $1BB, perhaps $2BB maybe for regular operating purposes?  So maybe a cushion of $6BB?  At this burn rate, they've got a bit over a year, maybe 1.5 years to into a position of profitability?

 

Can they cut expenses a bit?  No doubt they can.  Can they cut expenses enough to get to profitability? They've got to make up at least $4BB a year to simply break even.  I have my doubts.

 

I would also be very interested to see the churn of drivers.

 

My DAD was/is considering driver for UBER!  They sent him an email for a $1,000 bonus if he completed a certain number of trips.  So he is thinking, "why not?  drive the required number of trips and collect the bonus, and then bye-bye!"

 

How many drivers are simply driving for the crazy bonuses that have been offered? 

 

After the bonuses are paid out, how many of those drivers do more than 1-2 trips per week?

 

UBER has also been around for several years, and is doing over $11BB a year in revenue, they aren't exactly a startup at this point.  In my circle of family/friends/associates, those who are interested in using/driving UBER are doing so for the most part at this point.

 

I think there is real danger here of losing on your investment.

[Guest ajc]

 

 

They have about 8BB of cash in the bank.  The company can't run on a zero balance, so they might need $1BB, perhaps $2BB maybe for regular operating purposes?  So maybe a cushion of $6BB?  At this burn rate, they've got a bit over a year, maybe 1.5 years to into a position of profitability?

 

 

 

When $8B cash from their IPO proceeds will be showing up on the balance sheet next quarter, together with $1B for a stake in their self-driving unit from Toyota and others.

And reducing incentives like they said they would on the call, may mean they need to invest less than $500m per quarter in growth before long.

And their stakes in Didi and Grab are worth a combined $15B and could probably be sold back for a discount while still netting around $10B in cash.

Plus, their reasonable debt load gives them another avenue to raise money.

But your "research" and "due diligence" says Uber only has two years to get to profitability.

 

 

[Spekulatius]

 

Earnings slides - https://s23.q4cdn.com/407969754/files/doc_financials/2019/Q1/Q1-2019-supplemental-slides.pdf

 

Earnings call - https://investor.uber.com/news-events/default.aspx

 

The call was roughly in line with what I was expecting. Uber has said from now they expect to decrease incentives and discounts going forward. Eats growth was impressive, my thinking is it'll eventually be the second player in the US food-delivery market after Doordash and this will reinforce driver and rider loyalty to the platform because of the increased optionality it offers.

 

Related to that, the emphasis placed in the beginning of the call and the Q&A on loyalty programs for both drivers and riders makes it seem like the thesis I outlined before in this thread is starting to play out. Looks like they are strongly focusing on rewards, subscription, and cross-selling to keep people using the Uber platform over any alternatives and this sounds like it is already increasing loyalty and purchases in their early US tests. What was said about Eats take rates improving from now on was good to hear, and it's great how they're able to use their huge cash reserves to help give them an advantage in growing their India Eats business at a rate that gives them a real chance of being a top two food-delivery player there. Uber Cash is another interesting notable, given that there's a small chance it could potentially lead them down the WePay or AliPay route, to at least a minor extent over time.

 

Still seems they have more than enough cash to last for a long time provided they stick to their previously mentioned goal of reducing losses, becoming cash flow self-sustaining and then finally reaching profitability. I did lighten my position a little when it went up into the 40's for a quick 10% gain. I'm still pretty bearish about the overall environment based on this new wave of tech IPO valuations, as I wrote about before (https://twitter.com/tonyjclayton/status/1118205158721249280), so I don't want this to be too big of a position right now and have been maintaining a very large cash holding in my portfolio for the past month and a half. Overall, I still think Uber is a pretty good long-term value at these prices though and worth having some kind of toehold stake in, even if I can easily imagine this entire hot, new IPO sector falling sooner rather than later and offering improved buying opportunities.

Ubers core platform grew 10% YoY, so it looks like we are plateauing here. I guess Uber eats is needed to keep the growth story alive, because otherwise, nobody is going to pay much for a platform that grows 10% YoY and loses 33% of their revenues.  Core platform is still losing a lot of Money and now they are starting new business that is bound to loose a growing amount of money. The whole thing looks pretty desperate to me.

 

[Gregmal]

My spider senses in terms of where we are in the market cycle only start tingling more when we try to make value proportions out of companies like Uber

[RuleNumberOne]

The Uber IPO is a great success for some, it was at a valuation of $3 billion earlier this decade. To the retail investor, the Uber and Lyft IPOs appear to be flops, but it has created billions for VCs.

 

The game is to identify something that customers are already doing and offer to do it well below cost on AWS. Make sure you lose money. Your valuation will skyrocket very quickly.

 

The lose money and get rich idea is not restricted to consumer companies alone. It has been employed in the enterprise space as well. There is now a growing list of such private companies. After the Uber/Lyft IPOs, the number of loss-making unicorns has started exploding.

 

Low Fed rates have resulted in deflation by creating this "sell-below-cost" and get-rich bubble. Low Fed rates are thus not inflationary. If the market were to suddenly get fed up with loss-making companies, we would see a lot of price hikes.

[SharperDingaan]

Not to piss on the party but look at the accounting; capitalized costs versus expensed.

Granted it's a judgement call at this point, based on limited experience. But as that experience develops, it is pretty hard to see how there are not going to be some inopportune 'write-offs'.

 

Who made money here (VC's), who has it now (Uber), and who paid to play?

Maybe the recent IPO was because Uber had reached its optimum value/risk; it's still possible to make a buck, but now it's a lot more risky and the odds are biased against you? Ubers current sea of liquidity can hide a lot of swimming naked, for quite some time; and drivers only love you while you're paying (Fleetwood Mac).

 

There's little doubt Uber has some runway here, but maybe the real money now is going to made on it's way down.

 

SD

 

 

[Spekulatius]

Not to piss on the party but look at the accounting; capitalized costs versus expensed.

Granted it's a judgement call at this point, based on limited experience. But as that experience develops, it is pretty hard to see how there are not going to be some inopportune 'write-offs'.

 

Who made money here (VC's), who has it now (Uber), and who paid to play?

Maybe the recent IPO was because Uber had reached its optimum value/risk; it's still possible to make a buck, but now it's a lot more risky and the odds are biased against you? Ubers current sea of liquidity can hide a lot of swimming naked, for quite some time; and drivers only love you while you're paying (Fleetwood Mac).

 

There's little doubt Uber has some runway here, but maybe the real money now is going to made on it's way down.

 

SD

 

 

It’s a new game that VC wait until the valuations creep into the ten billion $ range before the IPO. With an $80B valuation, it is just not possible any more to get 10 bagger, so the upside probability is gone. What is somewhat surprising is that they even get turds like Uber and Lyft IPo‘d at this valuation. Some folks at home ask me about this new breed of IPO‘s and I typically tell them to just by Google instead and pay ~20x earnings ex cash.

But then on the other hand, it’s good to keep an open mind. I have missed tech stocks before. i owned Microsoft when it was in the mid twenties, but sold when it hit 40‘s and wasn’t deep value any more so,I lost out on quite a few gains. Maybe Uber‘s business model will work out, but my guess is that one one has a chance to get in at a way risk reward than what is currently available.

[Guest ajc]

 

In response to some recent thread comments, I'm the most bullish Uber holder here it seems but I also think the stock price could drop before the lock-up expires or because the tech IPO market is currently bubbly. That's a reasonable perspective. I made sure to highlight those risks in my opening post and my Uber stake is not a huge position. I'm also holding more cash than I have for a long time, and am overall relatively bearish on tech and growth stocks right now.

 

The counterpoints to this argument are that we've not seen an insane blow-off top in the NASDAQ, Uber was supposed to IPO at $120B as recently as March (https://www.moneyweb.co.za/news/companies-and-deals/uber-is-said-to-pick-new-york-stock-exchange-for-2019-mega-ipo/) so a fair amount of euphoria has been taken out at today's price, and after backing out cash plus the Didi/Grab stakes it trades at around 3x sales. The vast majority of commentary in the public and investing sphere is also convinced the company is nothing but a plague on society, with an unworkable business model, that will soon go bankrupt. There is essentially no cheery consensus around Uber.

 

That all said, I'm also deeply skeptical that posters who discuss 100's of different stocks per year on COBF have the right approach for delivering much valuable insight about Uber. A diverse basket investment methodology can do well, but almost by definition will miss opportunities that require scratching far beneath the surface. This is even more true when talking about any that might have 10-bagger potential. It verges on the delusional to expect opportunities like that to reveal themselves easily. So I think a number of the comments being made here sound ignorant, and indicate an unwillingness by some to do the work required to genuinely understand the variables that will likely influence Uber's economics going forward.

 

We will see. It is of course also possible, that I could be completely wrong about Uber and its prospects.

 

 

 

[DTEJD1997]

 

In response to some recent thread comments, I'm the most bullish Uber holder here it seems but I also think the stock price could drop before the lock-up expires or because the tech IPO market is currently bubbly. That's a reasonable perspective. I made sure to highlight those risks in my opening post and my Uber stake is not a huge position. I'm also holding more cash than I have for a long time, and am overall relatively bearish on tech and growth stocks right now.

 

That all said, I'm also deeply skeptical that posters who discuss 100's of different stocks per year on COBF have the right approach for delivering much valuable insight about Uber. A diverse basket investment methodology can do well, but almost by definition will miss opportunities that require scratching far beneath the surface. This is even more true when talking about any that might have 10-bagger potential. It verges on the delusional to expect opportunities like that to reveal themselves easily. So I think a number of the comments being made here sound ignorant, and indicate an unwillingness by some to do the work required to genuinely understand the variables that will likely influence Uber's economics going forward.

 

We will see. It is of course also possible, that I could be completely wrong about Uber and its prospects.

 

AJC, you really think that at this point UBER has the potential to be a 10 bagger in the next 3, 5, 10 years?  At any point?  That UBER is eventually going to be a $750BB or $800BB company? 

 

What will their future earnings have to be at that point to justify that valuation?

 

What level of sales/revenue will they have to have to produce those earnings?

 

They are losing money now.  They are going to be losing money in the near & intermediate future.  You think if they can go from a $1BB loss per quarter to only $500mm that is a "win"?

 

I've seen this before, happened during the internet boom.  Almost every analyst was talking about "eyeballs & mindshare".  Profitability didn't matter, it is the internet!  It is different this time! 

 

Finally, you are skeptical about the quality of due diligence & analysis of other posters on the board? You are posting pictures of cats?  I'm calling you out.  Keep that #$@#%$ on the Yahoo discussion boards. 

[DTEJD1997]

Hey all:

 

Has this been happening to anyone else?

 

For the first time ever, I've noticed that Groupon is bombarding me with offers/coupons for UBER service.  Everyday for the past 3-4 days, I've gotten offers.  I've never seen UBER partnering with Groupon, and almost all previous offers I've gotten from UBER has been to be a driver.

 

Now they are partnering with Groupon for riders.

 

 

[SharperDingaan]

There is nothing wrong with being bullish.

We just have to recognize that the things we think are going to happen, may not happen in the time we're thinking of. How many times have we been into something too early? or too late? We were bang on in our assessment, but way off on our timing?

 

At at IPO, most folks are buying to flip -  not holding on for a 10 bagger.

It's only after the stock has been in the gutter for a while, that the 10 bagger investors come out. We call them 'value' investors; many others call them 'garbage collectors'. It just reflects different strategies, and different POVs.

 

Is Uber likely to live up to its hype? Unlikely

Is there an actual business there? Yes, but it may well not be the one you thought.

Outcome? Downward volatility, until the market eventually finds its 'level'

 

SD

 

[Guest ajc]

 

 

AJC, you really think that at this point UBER has the potential to be a 10 bagger in the next 3, 5, 10 years?  At any point?  That UBER is eventually going to be a $750BB or $800BB company? 

 

What will their future earnings have to be at that point to justify that valuation?

 

What level of sales/revenue will they have to have to produce those earnings?

 

They are losing money now.  They are going to be losing money in the near & intermediate future.  You think if they can go from a $1BB loss per quarter to only $500mm that is a "win"?

 

I've seen this before, happened during the internet boom.  Almost every analyst was talking about "eyeballs & mindshare".  Profitability didn't matter, it is the internet!  It is different this time! 

 

Finally, you are skeptical about the quality of due diligence & analysis of other posters on the board? You are posting pictures of cats?  I'm calling you out.  Keep that #$@#%$ on the Yahoo discussion boards.

 

 

 

Uber has 110 million users already in 2019 and is growing its user base at 20%+ annually. They should reach 400 million to 500 million users by 2030. Assuming far slower 10% annual user growth for the sake of argument, they would still get to roughly 300 million riders. We already know car owners in the US spend $6000 per year on a vehicle at today's prices, so with ubiquitous coverage Uber could offer a $500 per month transport subscription by 2030. Consumers probably also spend another $2000 per year on takeout and restaurants, which Uber Eats can supply. Using the conservative 300 million user number and assuming 150 million of them live in the developed world, then Uber's gross sales for those countries would be 150M x $8000, or $1.2T annually. Their 20% take rate by 2030, would result in net developed world revenues of $240B per year.

 

The other 150 million users who live in the developing world might only spend $2000 annually on Uber and Uber Eats combined by 2030. That results in gross sales of $300B, which is $60B of additional net revenue. Uber would have total global net revenue of $300B. Using companies like eBay or Cisco as comps, you get 20%+ operating margins. Uber generates operating income of $60B+ in that scenario. eBay currently trades at 3.3x sales, Cisco at 5x sales, and Alphabet (similar operating margins) trades at 5.5x sales. eBay is 24 years old, Cisco 34, and Alphabet 21. Uber will be 21 years old by 2030. Assuming a 4x sales multiple, it will have a $1.2T market cap as opposed to the current $70B+ one.

 

They also own 15% of Didi (the Uber of China) and 23% of Grab (the Uber of ASEAN). Those could well become trillion dollar companies by 2030, given their current trajectories. These stakes mean another potential $300B+ in market cap to add to Uber's $1.2T. That's a potential 20-bagger in total and is all calculated on the basis of an Uber growth path that is dramatically lower than what they're currently achieving. It also values their Freight business at zero, even though it's already a leader in a $600B industry (https://www.joc.com/technology/convoy-and-uber-freight-take-us-truck-brokerage_20180208.html), and includes their autonomous vehicle program plus digital wallet and fintech businesses as free options (https://www.cnbc.com/2019/06/10/uber-is-making-a-push-in-financial-products-with-new-york-hiring-spree.html).

 

Your characterization of my '$500M' comment is more a reflection of your willingness to comprehend, rather than anything else. I've shown on this thread how starting from next year you will get EVs that are built for ride-sharing (eg. the Bolt Nano for $10000) and that the cost and economics will begin to make a lot more sense for drivers. I've also explained there will likely be more than enough EV options on price and battery range by 2025, so both Uber and its drivers can operate profitably without any fee changes. My use of the $500M and lower numbers was to show that Uber only needs to have cash until 2025, or sooner, for the economics to be working well for all stakeholders based on what we already know today.

 

Your knowledge of consumer tech and the internet seems extremely superficial. It also sounds like you have very little understanding about how the mobile internet allows for this generation of tech companies to be far bigger than those of the Dotcom era. I've seen your negative comments on the Amazon, eBay, and Facebook threads over the years. Your bearish sentiments have been wrong on all three businesses, and unfortunately seem like nothing more than mixing up personal gripes with a genuinely objective investment perspective. Your entire angle on these companies seems to be that because you or your friends had a few bad experiences or hold some cynical opinions on the business, therefore they're not worth betting on.

 

That comparison of yours to the Dotcom era lacks nuance. I also lived through that mania and saw what went on. The vast majority of internet stocks then had no revenue model. Online advertising wasn't even a proven approach at the time. Uber, Airbnb, and others, are on the other hand, selling something which people are already used to paying lots of money for. In that sense, the era's have vital differences. On top of that, the average company IPOed at 3 or 4 years old back then. Today, that's closer to 10 years old. While that does mean you miss out on the exponential early growth years, it also means the private markets are where many of the crappy companies now end up dying so they never make it out the IPO gate.

 

In other words, it's the surviving companies that are now going public and on average they have far better business models and more reliable unit economics than 1999/2000. Yes, P/S multiples are definitely bubbly currently in the tech IPO market (as I've noted numerous times in this thread), but there are key differences at the fundamental level that make many of the companies qualitatively better businesses than those of the Dotcom era (even though there are undoubtedly also still plenty of culty and faddish unicorns around today too). I think people should be pretty defensively positioned in this sector right now, but to say that Uber should be lumped in with a bunch of "eyeballs & mindshare" companies is gobbledygook.

 

When VCs realized a person spends $6000 per year on a vehicle, they were willing to use billions in cash to win regional ridesharing markets. This is not early Google where the advertising model was still in question, and where even today their ARPU is only $256 annually in the US and $137 globally. When you clearly see ARPU for Uber and Eats in the US could be $1600 annually and $400 in the developing world, then you go big in order to dominate that market. So the idea that Uber is just burning cash and after that they'll go bankrupt, doesn't scratch beneath the surface. What's more likely happening is they're spending incentives of $50 or so per user and $1000 per driver in order to get people habituated while EVs and micromobility take over as their primary mobility preference, and while they bundle their services (https://techcrunch.com/2019/06/04/uber-eats-uber-eats/) and create a subscription offering that gives rewards to those who use the service the most frequently and loyally.

 

20 000 Jump bikes, like they were willing to put into Chicago, is also $10M at $500 a pop. If you're expanding e-bikes to 50 cities a year, that adds up. Incentive spending adds up too, if you're offering millions of people in new cities $50 each. Setting up Uber Eats in new geographies is also not free, but you can see the results in their revenue growth for that vertical. On the other hand, if developed world users have an ARPU of $1600 and rest of world users $400, then it could well make total sense to get them habituated if it only costs you $50 or so per user to bring on many regulars. All things being equal, it's about the CAC/LTV working out and being sensible, not the absolute number you're currently investing in growth. In other words, given that $1 spent by Uber now via incentives might add up to $30 or more in annual revenue, somewhere not far down the road, it's not crazy that they're currently spending billions of dollars per year in order to reach even more users and cities so they can cement the regional dominance of their product offerings.

 

Finally, stylistically I've attached one meme image on average for every two hundred and fifty of my posts on this board. You've WRITTEN the majority of your 1500+ posts CAPITALIZING random words for emphasis like an ATTENTION-SEEKING pamphleteer, and in the PROCESS shown the forum how LITTLE you respect standard internet ETIQUETTE norms yourself. As a result, your career obtuse posting numbers leave us all in the dust and mean you're in no position to be throwing criticisms around. Feel free to save your hypocrisy and lack of introspection for someone who thinks your opinions on the topic are worth something. Alternatively, you could always focus that energy on actually reading the S-1 and doing some basic research on Uber and the ridesharing industry.