Capital Lab for Edge Investing
Capital Lab for Edge Investing
With Uber shares up 51% this year, the question isn't whether it's been a good run – it's whether the party can continue. The market clearly thinks so, but let's dissect the claims and see if the numbers truly support the hype.
Uber's core narrative revolves around its marketplace model: matching riders with drivers and hungry customers with delivery couriers. In Q3 2025, mobility gross bookings hit $25.1 billion, translating to $7.7 billion in revenue. Delivery wasn't far behind, with $23.3 billion in gross bookings and $4.5 billion in revenue. Rapid growth? Absolutely. Sustainable? That's where the skepticism kicks in.
The "network effect" argument is classic tech stock boosterism. More riders attract more drivers, leading to shorter wait times and a more valuable platform. Uber's boasting of 189 million monthly active users seems impressive until you consider the churn rate and the constant need to incentivize both riders and drivers with discounts and promotions. How much of that "demand" is truly organic, and how much is fueled by unsustainable subsidies? And if those subsidies disappear, what happens to the network effect?
Then there's the Bill Ackman factor. His firm, Pershing Square, snagged 30.3 million shares of Uber, making it a whopping 20% of his portfolio. Investors are told to "pay attention to what Ackman owns," because he supposedly follows the Warren Buffett playbook of concentrated bets on high-quality companies. But even Buffett has made mistakes (see: his airline investments pre-pandemic). Ackman's bullishness is a data point, not a guarantee. It's one billionaire's opinion, albeit a well-informed one.
Now, let’s peek behind the curtain. While institutional investors have largely increased their positions in Uber, insider trading activity paints a more nuanced picture. Over the past six months, Uber insiders have engaged in 17 open market trades – 16 sales versus a single purchase. CEO Dara Khosrowshahi dumped 450,000 shares for an estimated $43.7 million. Tony West sold 112,500 shares for $11.2 million. CFO Prashanth Mahendra-Rajah made a symbolic purchase of 5 shares for $465, while simultaneously selling 11,000 shares for over a million dollars.
This isn't necessarily nefarious. Insiders often sell shares for diversification or liquidity. But the overwhelming skew towards selling raises eyebrows. Are they cashing in while the stock is hot, perhaps anticipating a cooldown? Or do they know something the average investor doesn’t?
And what about those glowing analyst ratings? We see 20 "buy" ratings and zero "sell" ratings. It's an echo chamber of optimism. Price targets are all over the map, with a median of $110. Lloyd Walmsley from UBS is particularly enthusiastic, pegging it at $122. But price targets are, at best, educated guesses (often self-serving ones). Analysts are notoriously slow to downgrade stocks, especially when those stocks are generating trading volume for their firms.
I've looked at hundreds of these filings, and this particular pattern is unusually skewed.
Morningstar gives Uber a "narrow moat" rating based on network effects and user data. They also raise their fair value estimate from $90 to $93 (a rather modest bump, all things considered). But they flag the big, hairy risk: autonomous vehicles (AVs). The question of who owns the AV fleet – Uber, private equity, or the AV companies themselves – remains a major uncertainty. After Earnings, Is Uber Stock a Buy, a Sell, or Fairly Valued?
Uber's management seems to hope private equity will foot the bill, but Morningstar rightly suspects this is more wishful thinking than strategic foresight. If AV companies like Waymo and Tesla develop their own ride-hailing apps, Uber could be disintermediated, relegated to a mere fleet management service.
The Toast partnership – making Uber a preferred delivery platform for Toast restaurants – is seen as a potential buffer against AV risk, shifting focus to food delivery. But food delivery is a notoriously competitive and low-margin business. Is it really Uber's savior?
Uber's stock surge feels less like a "ride to riches" and more like a speculative bubble inflated by hype and easy money. The underlying business is improving, but the risks – AV disruption, regulatory headwinds, unsustainable subsidies – are substantial. The insider selling and analyst groupthink add another layer of concern. I wouldn't bet the farm on this one.
