1 Reason Uber Stock Is Approaching All-Time Highs

Key Points

• Uber shares trade just 3% off their record high from July.

• Management has prioritized generating profits without sacrificing growth.

• The company’s momentum is set to continue for years.

• 10 stocks we like better than Uber Technologies ›

Uber (NYSE: UBER) is currently on an unbelievable run. Shares have skyrocketed 56% just this year (as of Sept. 9). Investors are certainly excited.

This growth stock hit an all-time high of $97.48 in July of this year. It trades 3% below that peak today. Here's one reason Uber is trading close to record territory.

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Huge losses to huge profits

Over the long term, a stock's performance starts to mimic the company's underlying fundamentals. And in this instance, Uber's fundamentals have improved dramatically, particularly on the bottom line.

During the second quarter (ended June 30), the business reported $1.5 billion in operating income. This was good enough to post an 11.5% operating margin. And the figure was up 82% year over year, showcasing a rapidly scaling platform.

The market is clearly enthusiastic about Uber's earnings power. It's a huge reversal of fortunes from several years ago. In Q2 2019, the company reported a monster $5.5 billion operating loss. CEO Dara Khosrowshahi deserves credit for emphasizing cost discipline and efficiencies without sacrificing growth in the process.

Looking ahead

The leadership team has an extremely positive view about Uber's prospects, as they recently revealed a new share buyback program. "Today's announcement of a new $20 billion share repurchase authorization underscores our confidence in the business, following yet another quarter of strong top- and bottom-line performance," CFO Prashanth Mahendra-Rajah said.

Wall Street is also very optimistic. Consensus analyst estimates call for operating income to soar 282% between 2024 and 2027. That translates to a fantastic 56% annualized gain.

Uber's business is firing on all cylinders these days. It wouldn't be a shock to see the stock continue to hit new all-time highs in the near future.

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Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Uber Technologies. The Motley Fool has a disclosure policy.