Uber's stock is almost historically cheap. Are robotaxis an existential threat?

By William Gavin Bernstein analysts think Uber investors have been overly fearful of the threat posed by self-driving cars, particularly if autonomous-vehicle technology gets widely licensed Uber could benefit from a market filled with autonomous-vehicle companies. But if only a few providers can dominate the market, the backdrop might be less favorable. As investors worry that autonomous vehicles will come to seriously threaten Uber Technologies' opportunity, the stock has become almost historically cheap. It trades at about 15.5 times estimated enterprise value to adjusted earnings before interest, taxes, depreciation and amortization - a low level it's been near only a couple of other times in the past, including when AV fears peaked a year ago, according to Bernstein analysts. The analysts, led by Nikhil Devnani, think the reaction has been too severe, calling the stock "overly discounted" due to Uber's (UBER) strong fundamentals. But "the bear case is hard to disprove overnight," Devnani wrote. "$80 is the new $60, considering Ebitda is poised to grow 34% this year," Devnani said. In other words, while the stock is up significantly from the roughly $60 level it traded at a year ago, the multiple is similarly depressed because earnings trends, the other part of the valuation ratio, have also been improving. "That said, at the risk of being too cute, we do think the setup is a little different this time" because of the Tesla (TSLA) "wild card," Devnani added. Uber is currently trading at around $80 per share. Devnani has a $115 price target, which implies a 44% upside, and rated the stock at outperform. While other players in the U.S. AV industry have been relatively slow to scale, Tesla has promised rapid expansion since it debuted in its first market about six months ago. Bernstein noted that significant progress from Tesla would likely pressure rideshare multiples. There's also likely some impact from the recent progress shown by Alphabet (GOOGL)-backed Waymo, the only company operating a commercial driverless robotaxi service without safety monitors in the U.S. It aims to serve more than 1 million fully autonomous rides every week by the end of next year. Amazon (AMZN)-backed Zoox, also just announced that it has logged its first 1 million miles driven by its custom robotaxis. Don't Miss: Google has been crushing it with AI this year in this overlooked way The most important question, according to Bernstein, is how fragmented the market gets. For example, if AV firms like Waymo choose to license out their technology, the market would likely get more fragmented, which would be a bonus for aggregators like Uber or Lyft (LYFT). Conversely, a more centralized market heavily dominated by just a handful of players, such as Waymo and Tesla, would hurt Uber's potential market opportunity. That's part of why Uber's reliance on partners in its autonomous transition has been "uncomfortable" in Bernstein's view. The company has linked up with at least 21 companies to add autonomous passenger cars and trucks, as well as delivery robots, to its services across the world. That includes a suite of private companies, like the self-driving truck firm Waabi, and public ones, such as Stellantis (STLA) and Nvidia (NVDA). It also works directly with Waymo, which offers robotaxi trips in two cities exclusively on the Uber app. Uber's latest moves include launching robotaxis in Dubai with partner WeRide (WRD) and offering supervised AV trips in Dallas, through its deal with Avride. The rideshare provider expects to have AVs operating in at least 10 cities by the end of the year. Uber CFO Prashanth Mahendra-Rajah has defended Uber's approach, saying at a Dec. 3 UBS conference that its strategy will help providers get their money's worth by ensuring AVs are "never empty." He added that it also helps ensure a "seamless" experience for consumers and gives them options. "Ultimately, there's going to be a choice of taking a Waymo, taking a Nuro, taking a WeRide, or taking a Baidu (BIDU) robotaxi," Uber CEO Dara Khosrowshahi told Stratechery earlier this year. "I do think the aggregator model certainly would be helpful for all of those companies to succeed." Uber is expected to carry out 22% of all U.S. robotaxi trips in 2032, falling behind Tesla and Waymo by 2032, according to projections from Morgan Stanley. About a fifth of Uber's expected AV trips are expected to be through deals with Waymo. Human-driven trips are still set to massively outnumber robotaxi rides by then. Morgan Stanley has an overweight rating on Uber's stock, although the firm lowered its price target to $110 from $115 and its target multiple by about 11% in the Dec. 7 report. -William Gavin This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal. (END) Dow Jones Newswires 12-18-25 1150ET