Uber Technologies (UBER), the ride-hailing platform, has moved its robotaxi strategy into a more important phase. Indeed, fully driverless vehicles from Chinese technology group Baidu (BIDU) are now carrying paying Uber riders in Dubai. This matters because Uber now has several autonomous-vehicle providers operating through one marketplace in the same city. As a result, Uber is showing that it may not need to build the best self-driving system itself. Instead, it could become the platform that connects robotaxi fleets with millions of existing riders.

Catalysts that May Push the Stock Higher

Interestingly, Dubai gives investors an early look at how valuable Uber's network could become as autonomous vehicles expand. Under the Baidu agreement, the partnership is expected to grow to thousands of Apollo Go vehicles across Uber's global network. Meanwhile, autonomous-driving developer Pony AI (PONY) agreed this month to work with Uber on more than 2,000 robotaxis across Europe.

These partnerships support Uber's argument that self-driving companies may prefer its existing customer base instead of spending heavily to build their own ride-hailing networks. Uber can provide the demand while partners provide the vehicles. If that model works, Uber could benefit from robotaxi adoption without taking on the full cost and technical risk of developing the technology itself.

At the same time, Uber's valuation is quite attractive. More specifically, Uber is trading at about 15 times trailing free cash flow, which is very reasonable if the company keeps its core marketplace healthy while adding autonomous trips. Therefore, investors may choose to re-rate the stock with a higher valuation multiple if things continue to go well.

Risks to Watch Out For

Nevertheless, the biggest risk is that robotaxis may require more spending than investors expect. In fact, management has already made more than $10 billion in multiyear autonomous-vehicle commitments. That is a major change from Uber's traditional model, where drivers usually provide the vehicles.

Because of that shift, Uber could face higher capital needs before autonomous fleets produce attractive returns. If spending rises too much, less cash may be available for share buybacks or other investments. Investors therefore need to watch whether Uber can expand robotaxis without hurting its profitability.

Regulation adds another risk. For instance, London's planned driverless rollout has faced delays as regulators work through approval requirements. This shows that strong technology alone does not guarantee quick market entry, since government approvals can still slow down commercial expansion.

There is also a longer-term competitive issue. Major autonomous-vehicle developers could eventually use their own apps in their most attractive markets. If that happens, Uber must prove that access to its large rider network is valuable enough to keep those fleets on its platform.

Is UBER Stock a Good Buy?

Turning to Wall Street, analysts have a Strong Buy consensus rating on UBER stock based on 29 Buys, three Holds, and zero Sells assigned in the past three months, as indicated by the graphic below. Furthermore, the average UBER price target of $104.39 per share implies 38% upside potential. (See UBER Stock Forecast).