Uber Stock : A Guide
Investors everywhere are eagerly anticipating the possibility of being able to buy Uber stock — if, and when, the company finally launches an Uber IPO (Initial Public Offering) in 2017 or 2018.
In this overview, we’ll go over some basic questions:
- Can I buy Uber stock?
- If so, how do I buy shares of Uber Technologies, Inc?
- And…Should I buy Uber stock?
Below, we outline the ways average investors can ‘get in’ on Uber right now (even before the company goes public). Furthermore, we examine the advice of investment experts.
Can I Buy Uber Stock?
In a simple answer: No. Not yet.
Uber is a privately held company, so — as of Summer 2016 — there is no way to directly buy shares of the company.
Uber is currently valued at around $66 billion USD. Because of its enormous value, it has (thus far) been capable of raising large amounts of private money, whenever it has required cash infusions to continue operating as a business.
Why is that important?
Uber’s ability to raise large amounts of capital from a variety of sources means it is under no pressure to raise money via an IPO. This means that it might be quite some time until the company does an IPO to raise even more money. Hence, it might take time until the public can ‘get in on the action’ and purchase shares of their own.
How can I buy shares of Uber?
As noted above, you cannot yet buy shares of Uber (or Uber stock). It’s impossible — nobody is currently able to buy Uber stock.
However, once Uber goes public (which could possibly happen in 2017 or 2018), it will be relatively straightforward to purchase Uber shares. To buy, you will simply have to follow a few steps:
- Sign up with an online broker account (if you want to get started buying stocks, you’ll have to set up a trading account online).
- Choose your favorite online-broker option — popular sites include etrade.com, TradeKing.com, OptionsHouse.com, scottrade.com, and opteck.com. Most brokers charge between $4.99 and $9.99 per trade.
- If you are American, input your Social Security Number (SSN), and activate your account.
- Start trading.
BUT — What if I don’t want to wait until Uber’s IPO? Can I get started right now?
In some ways, yes.
While it’s not possible to directly buy stock in Uber today, it is still possible to invest in Uber indirectly.
For instance, one method of indirect investment is to purchase shares of publicly-traded companies which already hold significant private shares of Uber. In other words — some companies have already provided Uber with private funds — funds which Uber currently uses to run and expand its business.
When Uber finally goes public, a large part of those companies’ balance sheets will inevitably be affected by how Uber performs in the market.
In this respect, you can invest in Uber, jut not in a traditional way yet (Uber stock).
You simply need to target companies which are already heavily invested in Uber — and which happen to be traded publicly:
- BlackRock Inc (BLK). BlackRock has invested approximately $175 million into Uber.
- Alphabet Inc (GOOG). Better known as Google, Alphabet has invested heavily in Uber, to the tune of $258 million
- Microsoft Corp (MSFT). Microsoft holds a significant share of the company, having invested around $137 million in 2015.
- Fidelity Investments’ Funds (Contrafund, OTC Portfolio, Growth Company). Fidelity has invested $425 million into Uber.
When Uber goes public, these companies’ share price might be positively (or negatively) affected by Uber’s market performance after its IPO.
Do you think Uber will perform well in its IPO and beyond? You might want to consider looking into purchasing some shares of these companies (as an indirect means of cashing in on Uber’s future).
However, if you think Uber is overvalued — steer clear.
*Keep in mind, it’s important to remember that these companies’ future value will be affected by a variety of factors — not just their major private holdings in Uber. So examine them closely before buying in.
Can I bet against Uber?
If you think Uber is overhyped and overvalued, you’re always able to bet against the company by purchasing a competing company’s stock — or betting on trends which run in direct opposition to Uber’s projected market strategy and value expectations.
It’s common knowledge that Uber — especially over the next few years — will face strong regulatory challenges all over the world, as well as dozens of upstart competitors eager to challenge its global supremacy as a rideshare company.
Think Uber’s value will tumble? Or that the company will eat through its cash reserves before its IPO?
If so, you might want to think about buying shares in a market which serves as a major testing-ground for Uber — specifically, New York City’s TAXI/Medallion industry, which loans capital to the city’s taxi-cab industry (and effectively operates in direct opposition to Uber).
If you think Uber will come crashing down, or that the city’s taxi industry will stage a comeback as it considers adopting a more technologically-progressive hailing app in the style of Uber’s Cab App, then you might want to consider buying into Medallion Financial Corp (currently listed on the stock exchange as TAXI).
Of course, if you believe in Uber, you’re also able to short TAXI shares, and effectively bet against the continued viability of the nation’s largest taxi market.
Similarly, you can take a parallel approach and invest in an entity like Apple, which recently invest $1 billion into Didi Chuxing (Uber’s major competitor in the rapidly-growing Chinese rideshare market).
Should I buy Uber Stock (if and when the company finally goes public)?
This is the million-dollar question. Should I buy Uber stock?
Experts differ greatly on this subject.
Some financial analysts point to Uber’s robust expansion model (and continued market dominance) as signs that it will be a solid stock target, when it finally has its IPO.
Positive comparisons are sometimes made to entities like eBay (which saw an innovative company navigate new terrain and establish a strong multi-billion dollar valuation , as well as a dependable revenue stream and strong growth).
At the same time, other experts point to Uber’s ongoing challenges: regulatory feuds, legal disputes, emerging workforce problems, and constant chatter about unionization. Competitors, from Lyft to Didi Chuxing, are nipping at its heels, forcing Uber to spend money at a rapid pace in order to fend off aggressive market moves.
Below is a list of investment experts’ recommendations on Uber, which may give prospective investors some insight & context on Uber’s viability as a stock pick:
The Experts Weigh In
- Aswath Damodaran (NYU Stern School of Business)
Should I Buy? NO.
Quote: ‘…Unlike a year ago when the competition was small and splintered, they are now playing against the big boys in their own game. Lyft’s announcement last month that it will merge with Chinese ride-hailing company Didi Kuaidi is a bad sign for Uber. Another reason why Uber may have problems with profitability are the regulatory hurdles the company faces around the world’.
- Profit Confidential (ProfitConfidential.com, Online Stock Analysts)
Should I Buy? NO.
Quote: ‘Wait for the fog of uncertainty to lift, granting some clarity for the company’s future.’
- Bijan Khosravi (Financial Analyst, forbes.com, Forbes)
Should I Buy? YES.
Quote: ‘With Uber’s market position, and with Lyft’s recent $500 million investment from General Motors both companies have grabbed the leadership spots. They have solidified their position as the gorillas of sharing economy. The rest of the players will continue to struggle or be gobbled up.’
- Lawrence Meyers (WyattResearch.com, Wyatt Investment Partners)
Should I Buy? NO.
Quote: ‘If a California jury decides [Uber partners are actually employees]… it will put Uber on the hook for tens of billions of dollars, and open the door to 49 other cases across the country. I think Uber has a much larger problem regarding its business model… As I recently wrote in the New York Observer, there’s plenty of evidence that Uber has hit market equilibrium with the New York City taxicab… In short, then, Uber is under siege from all sides. I think it’s foolish to get involved in an investment regarding Uber now or in the future.’
- Sramana Mitra (Financial Analyst, 1M/1M)
Should I Buy? MAYBE/NO.
Quote: ‘Over the past year, Uber’s competition has also increased. Lyft hasn’t expanded internationally, but it offers stiff competition to Uber within America. Then there are bigger players like Google who are expected to be eyeing the market. Uber has been trying to make inroads into the [Logistics/Delivery] segment, but hasn’t delivered successfully so far.’
- Rick Ackerman (Analyst, RickAckerman.com, Rick’s Picks)
Should i Buy? NO.
Quote: ‘Uber is not a publicly traded company, but if it were, I would recommended shorting as many shares as you could borrow, beg or steal. That’s because the four-year-old purveyor of on-demand transportation is probably as insanely overvalued as venture-stage companies ever get.’
- John Divine (Analyst, InvestorPlace.com, Investor Place)
Should I Buy? NO.
Quote: ‘The public markets will not respect the criminally insane valuations of the frothy private markets. In fact, you can simply look at Wall Street and see that there is literally no precedent for Uber’s current (delusional?) valuation. At a market cap of $68 billion, Uber trades at between 39 and 45 times sales. Who does Uber think it is? This is the peak. Enjoy it while it lasts, fellas. Because the three-to-six-month lockup period after the Uber IPO will be very painful to watch’.
- Madeleine Johnson (Finanacial Analyst, zacks.com)
Should I Buy? YES.
Quote: ‘Let me write that again: $51 billion. This number is a hard one to forget, and a figure that will be on the forefront of many investors’ minds come the time of its public offering, as it impressively showcases just how far this startup has come in a few short years…it is hard to bet against a company that has seen such massive growth in such a short time frame.’
- Alyson Shontell (Business Insider)
Should I Buy? MAYBE.
Quote: ‘…unlike most startups, Uber has the revenue, growth, and execution to back up its claims. Like the biggest businesses in the world, Uber didn’t just create a world-class product. It invented an entirely new industry. The company will generate more than $10 billion this year, according to an internal document obtained by Reuters in August, of which Uber will keep about $2 billion. And its growth shows no signs of slowing.’
- Steven Bertoni (Financial Analyst, forbes.com, Forbes)
Should I Buy? MAYBE.
Quote: ‘…Bears have yelled bubble–arguing that competition, labor and regulation will send the valuation into the guardrail. I’ve also spoken to ultra-bulls who predicting that Uber’s network and software combined with Google’s self-driving cars will eradicate yellow cabs (and maybe car ownership) forever.’
Uber Stock: Conclusions
There are no easy answers when it comes to valuations of an Uber IPO.
If the company ultimately goes public in 2017, 2018, or even beyond, it would be wise to keep an eye on a few variables:
- The company’s profit-margins & profit-per-ride numbers (analysis firms like Bloomberg claim Uber’s 2016 per-ride profit in the United States is $0.19, which is a good sign. If Uber sees similar stabilization globally, it will serve as a strong indication of the company’s overall financial health. Keep checking Uber’s fundamentals, and stay informed about its per-ride profits).
- The state of Uber’s (perilous) expansion into the Asian market. Many analysts claim this represents a key variable in maintaining its stratospheric value and long-term viability.
- Keep an eye on investor chatter, especially insiders like Bill Gurley — a once-bullish early investor and member of Uber’s board — who has unexpectedly spoken up about the company’s unorthodox fundraising and the long-term risks entailed in 2016.
It’s also worth remembering — in this new era of private mega-financing of Silicon Valley companies, it’s still possible that Uber does the once-unthinkable and decides to remain completely private — opting never to go public, defying the time-honored tradition of tech-giants like Facebook, Amazon and Google.
Anything can happen. Keep checking in as we evaluate the ever-shifting rideshare market. In addition, continue to monitor whether a potential Uber IPO is finally emerging on the horizon…