Uber Stock Is 20% Off Its All-Time High, While the S&P 500 Index Is Up 14% Since Then: Here's Why the Market's Bearish View Is Wrong.
Key Points
Investors continue to be concerned about the long-term risk that autonomous driving technology poses to Uber’s business model.
The company’s massive user base and powerful network effect put it in an advantageous position to serve ride-share demand.
This growth stock’s valuation is certainly being weighed down by the market’s worries.
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In October 2025, shares of Uber (NYSE: UBER) established a record. In the three years leading up to that peak, they soared 237%. Since that all-time high was reached, though, shares have fallen 20% (as of Aug. 25).
This downturn hasn't been a marketwide development. The S&P 500 index has climbed 14% after Uber hit its peak price.
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The investment community is clearly worried about something as it relates to Uber's business. But I don't believe the market's bearish view on this growth stock is warranted. Here's why.
Image source: Getty Images.
Autonomous vehicles add uncertainty to the driver's seat
If there's one thing investors hate, it's uncertainty. And when it comes to Uber, the biggest question mark focuses on the development of autonomous vehicle (AV) technology. There are two companies that immediately come to mind.
First is Alphabet's Waymo. In March, it was completing 500,000 paid weekly rides in 10 U.S. cities. Industry experts believe this platform has a huge lead in the AV race.
There's also Tesla. Its robotaxi service is available in six U.S. cities, eclipsing 380,000 cumulative unsupervised miles as of early August. Elon Musk has made it a corporate priority to expand this platform globally.
Investors are right to view the development of AV technology as a long-tail risk facing Uber. If Waymo and Tesla eventually create extremely safe self-driving capabilities that clear regulatory hurdles, provide an exceptional experience for riders, and find broad adoption, then their individual platforms could start to register tremendous success.
In a world dominated by AVs, Waymo, Tesla, and others could offer much cheaper rides. This would undermine Uber's entire business model.
Here's why Uber is well positioned
Uber isn't sitting on its hands. It has partnered with numerous AV companies to help them scale their operations. Uber plans to facilitate AV rides in 15 cities by the end of 2026. The business has also made certain equity investments in AV companies.
According to CEO Dara Khosrowshahi, AV rides represent only 0.1% of the worldwide ride-hailing market. He makes a valid argument that self-driving vehicles won't control the entire mobility market in the future. Management believes a hybrid model consisting of human drivers and self-driving tech will exist to handle demand that fluctuates drastically based on what day or time it is.
It's all about maximizing vehicle utilization and minimizing dead time. Uber's tech know-how and expertise at matching supply and demand at scale is a huge strength.
Uber's 20 largest U.S. markets account for 30% of its domestic gross bookings. Even if AV rides from other providers started to rapidly take market share in these markets, it wouldn't completely disrupt this business, which benefits from geographic diversification. What's more, Uber still has the advantage of being able to add supply to serve periods of peak demand.
Is Uber stock a buy right now?
Investors should have no complaints about Uber's financial performance. During the second quarter (ended June 30, gross bookings jumped 24% year over year to $58 billion. This drove revenue 12% higher. Uber currently has 208 million monthly active users on the platform, up 16% year over year.
Profitability is also impressive. The operating margin was 13.3% in Q2. This has expanded significantly in recent years as Uber's business scales up and the leadership team controls costs.
The company possesses a strong brand name. Furthermore, it benefits from powerful network effects. The mobility and delivery segments provide better value propositions as they attract more users. This supports Uber's competitive position.
Shares trade at an EV-to-EBIT (enterprise value-to-earnings before interest and taxes) ratio of 23.3, near the cheapest level ever. There's no doubt that this valuation multiple would be markedly higher if it weren't for the AV risk. As mentioned, Uber is positioned well. This justifies investors at least taking a closer look at buying this stock.
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Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet and Tesla. The Motley Fool recommends Uber Technologies. The Motley Fool has a disclosure policy.
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