Uber: The Investment Appeal

Uber is a fascinating company to watch, with its explosive growth, disruptive business model, and constant controversies. The company's global ride-sharing app, launched in 2009, disrupted modern transportation and made Uber the most valuable startup company in the world at one point. Uber's IPO in 2019 was highly anticipated, with Wall Street analysts valuing the company at $120 billion. However, Uber made history with the biggest first-day dollar loss in U.S. IPO history, and its stock closed the first day at $41.57, below the IPO price of $45. Despite the rocky start, Uber remains a leading company in the ride-sharing space, reporting 7.6 billion trips and $31.9 billion in revenue in its 2022 annual report. The company has also diversified its revenue streams by launching food delivery and freight shipping services. Uber's stock is considered a risky investment, but the company's potential for growth and market dominance makes it an attractive opportunity for investors.

Uber's disruptive business model

Uber began by serving people who wanted a black car service but could not afford it, making it more affordable and convenient than traditional black limousine services. Uber's mobile technology platform, built alongside GPS technology, has allowed the company to improve over time in terms of reliability, quality of service, and availability without adding the fixed costs of owning cars or manual dispatch services. This technology enabler has been a key factor in Uber's success, allowing the company to move up-market and improve its service.

Uber's business model is also unique in that it is a facilitated network business model, where customers exchange things with one another, rather than the traditional business model used by black car services. This model has allowed Uber to increase volume and scope, improving the utilisation of its technology platform and making each additional ride almost pure profit. Uber's low marginal cost structure, due to not owning any cars, has made the service more valuable and profitable as more people use it.

Uber's disruptive nature can also be seen in how it has threatened the taxi industry. Uber created business for black limousine drivers by increasing their utilisation and allowing them to make money during idle times. This insight has allowed Uber to price its offerings lower than taxi incumbents, as well as eliminate the need for taxi companies' middleman dispatch services. Uber's technology platform has made it difficult for traditional taxi companies to respond effectively, as they are constrained by their existing business models.

In conclusion, Uber's disruptive business model involves leveraging technology to improve convenience and affordability, a facilitated network business model, and a low-cost structure that has allowed it to rapidly scale and threaten long-time incumbents in the transportation industry.

The company's commitment to sustainability

Uber has committed to becoming a fully electric, zero-emission platform by 2030 in Canada, Europe, and the US, and by 2040 globally. This means creating clear pathways for drivers, couriers, customers, and businesses to be greener. Uber's Green Future program provides access to resources valued at $800 million to help hundreds of thousands of drivers transition to battery EVs by 2025 in Canada, Europe, and the US. The company is also working to support restaurant merchants' transition to recyclable, compostable, and reusable packaging, with the goal of ending all unnecessary plastic waste from Uber Eats restaurant deliveries by 2030.

Uber Comfort Electric is now available in over 50 major cities across 6 countries, allowing users to travel in no-emission luxury vehicles. Uber Green, the company's EV and hybrid ride option, is the most widely available solution worldwide for no- or low-emission rides and is available to employees with just a tap of a button. The company is also investing in low-emission and vehicle-free transportation options, including Lime scooters and bicycles, shared rides, and Uber Transit.

Uber is also committed to transparency and accountability in its sustainability efforts. The company publishes an annual ESG (environmental, social, and governance) Report and a Climate Assessment and Performance Report, which analyzes billions of rides taken on the Uber platform. Uber was the first—and remains one of the only—mobility companies to assess and publish impact metrics based on drivers' and riders' real-world use of its products. The company has also joined the Science Based Targets initiative (SBTi) to ensure accountability and rigor in its push to become a zero-emission platform.

Uber recognizes that tackling climate change is a team effort and is proud to be a sustainability partner of companies worldwide. Through Uber for Business, the company provides comprehensive climate metrics, transparent emissions tracking, and greener options for employees. This includes company-wide emissions reporting, with clear climate metrics to measure and share achievements, such as total CO₂ emissions, total low-emission trips, and average CO₂ per mile. Uber for Business also offers Uber Green, making it easy for employees to choose low-emission rides without compromising cost or convenience.

Uber's expansion beyond ride-sharing

Uber has expanded beyond its original ride-sharing business model in several ways. Firstly, it has diversified its transportation services, offering not just four wheels but also two wheels and 18-wheel freight deliveries. This expansion into freight and logistics services is a significant move beyond ride-sharing, connecting drivers and couriers with those who need to send or receive goods.

Secondly, Uber has expanded into food delivery with Uber Eats, which allows users to order food quickly and affordably. This service has become especially prominent during the COVID-19 pandemic, as people relied more on food delivery services.

Thirdly, Uber has committed to removing barriers to healthcare, although it is not clear from their website what this entails. They also mention creating new freight-booking solutions and helping companies provide a seamless employee travel experience.

In addition, Uber has expanded its ride-sharing services to include shared rides with UberX Share. This service, available in several cities worldwide, offers riders a more affordable option by matching them with co-riders headed in the same direction. This initiative aims to reduce congestion and emissions, making ride-sharing more sustainable and cities more livable. Uber has set goals to become a zero-emissions mobility platform by 2030 in the US, Canada, and Europe, and globally by 2040.

Lastly, Uber has expanded into the electric vehicle market, committing to becoming a fully electric, zero-emission platform by 2040. This includes offering riders more ways to ride green and helping drivers transition to electric vehicles.

The potential for long-term growth

Uber has been described as a risky stock, but it also has the potential for long-term growth. The company's market cap was in excess of $161 billion at the end of 2023, and it is one of the most closely followed and fastest-growing companies in the world.

Uber's potential for long-term growth is underpinned by its ability to constantly reimagine and reinvent itself. The company has expanded its services beyond its core ride-hailing business to include food delivery, freight shipping, and even electric scooter rentals. This diversification of its revenue streams has helped Uber to weather setbacks, such as the COVID-19 pandemic, which drastically reduced demand for its traditional ride services.

Uber's commitment to innovation and adaptability is further demonstrated by its push into new technologies, such as driverless cars, and its efforts to address issues such as urban congestion and its impact on the environment. The company has set a goal to become a fully electric, zero-emission platform by 2040, with all rides taking place in zero-emission vehicles or on public transit.

In addition, Uber's global presence and brand recognition give it a strong competitive advantage. The company has a presence in multiple countries and has become a household name for ride-sharing and delivery services. This brand recognition and loyalty can lead to increased market share and long-term growth.

However, Uber also faces challenges, including competition from rival companies, regulatory hurdles, and public backlash over issues such as surge pricing and the treatment of its drivers. Despite these challenges, Uber's ability to adapt, its diverse revenue streams, and its strong brand presence make it a potential candidate for long-term investment.

The risks and controversies surrounding Uber

Uber, officially Uber Technologies Inc., has been the subject of numerous controversies and legal actions since its founding. The company has been criticised for its aggressive business strategies, disregard for local regulations, unethical practices, and poor treatment of its employees and drivers.

Ignoring and Evading Local Regulations

Uber has been criticised for its strategy of commencing operations in a new city without regard for local regulations. If faced with regulatory opposition, Uber would call for public support and mount a political campaign, supported by lobbying, to change regulations. Uber argued that it is a technology company and not a taxi company, and therefore not subject to regulations affecting taxi services. In 2014, Uber drivers were told to ignore local regulations regarding airport pickups in California, and that the company would pay for any citations.

Legal Action from Taxi Companies

Taxi companies sued Uber in numerous American cities, alleging that Uber's policy of violating taxi regulations was a form of unfair competition or a violation of antitrust law. Although some courts did find that Uber intentionally violated taxi rules, Uber prevailed in every case, including the only case to proceed to trial. However, Uber agreed to a $178 million payout in a similar class-action lawsuit in Australia.

Attempts to Sabotage Competitors

In 2014, Uber employees were caught ordering and then quickly cancelling rides on competing services, such as Lyft and Gett, in an attempt to disrupt these services. Uber was also accused of recruiting people to use competing services solely to recruit their drivers to Uber. Uber denied any involvement in these incidents.

Data Breaches and Privacy Concerns

Uber has faced significant criticism for its handling of data breaches and privacy concerns. In February 2015, Uber admitted to a data breach that occurred nine months prior, in which the names and license plate information of approximately 50,000 drivers were inadvertently disclosed. Uber discovered this leak in September 2014 but waited five months to notify the affected individuals.

In November 2017, it was revealed that a separate data breach in 2016 exposed the personal information of 600,000 drivers and 57 million customers. Uber paid a $100,000 ransom to the hackers with the promise that they would delete the stolen data. However, Uber was subsequently criticised for concealing this data breach, and the company's then-CEO, Dara Khosrowshahi, publicly apologised.

Discrimination and Sexual Harassment

Uber has faced multiple lawsuits and allegations regarding discrimination and sexual harassment. In February 2017, a former Uber engineer, Susan Fowler, published a blog post alleging that she was sexually harassed at Uber and experienced gender bias during her employment. Fowler claimed that her complaints to Uber's human resources department were dismissed. This incident led to an internal investigation, which resulted in the firing of over 20 employees.

In April 2021, an arbitrator ruled against Uber in a case involving Lisa Irving, a blind American customer with a guide dog who was denied rides on 14 separate occasions. Uber was ordered to pay US$1.1 million in damages, attorney fees, and court costs.

Additionally, in October 2020, a class-action lawsuit was filed on behalf of all non-white drivers, alleging racial discrimination in Uber's use of passenger reviews to evaluate drivers. The lawsuit argued that Uber's star rating system disproportionately leads to the firing of people who are not white or who speak with accents.

Other Controversies

• Uber has been accused of causing an increase in traffic congestion in cities, worsening the urban congestion problem rather than solving it.
• In 2017, Uber was criticised for attempting to profit from a taxi workers' strike at JFK airport by suspending surge pricing. Uber defended itself by stating that the suspension occurred 30 minutes after the strike had ended.
• In 2016, French taxi drivers protested against Uber's attempts to expand its low-cost UberPOP service, referring to the company's practices as "economic terrorism".
• In 2015, Uber reportedly poached 50 employees from Carnegie Mellon's top robotics lab, accounting for about a third of the staff.
• In 2014, Uber's branch in Lyon, France, debuted a promotion to pair customers with "hot chick" drivers, which was quickly scrapped after backlash.
• In 2012, an Uber employee tracked the frequency of probable one-night stands in six US cities, coining the term "ride of glory" for the Uber equivalent of a walk of shame.

Frequently asked questions