Shares of ride-sharing company Uber Technologies (UBER -7.43%) dipped on Wednesday after the company reported financial results for the fourth quarter of 2024. The Q4 results were fine but the forward guidance fell short of what investors were hoping for. That's why Uber stock was down 7% as of 10:20 a.m. ET.
To truly have a handle on Uber's business, investors need to understand its gross bookings. Gross bookings refers to the total dollar value of transactions on its platform, excluding driver tips. In Q4, gross bookings were up a solid 18% year over year to over $44 billion. And for the upcoming first quarter of 2025, management expects 17% to 21% growth.
When it comes to the Q4 numbers, Uber's management had guided for a 16% to 20% increase in gross bookings. Therefore, its 18% growth in Q4 was squarely in the middle and not problematic. However, investors appear to have hoped for better growth in the upcoming quarter, causing the stock to pull back today.
On Jan. 6, Uber's management said that it plans to repurchase $1.5 billion of its stock on an accelerated plan, saying, "Our stock is undervalued relative to the strength of our business." As of this writing, Uber stock is down from when that statement was made, meaning that management believes it's even more undervalued now.
Uber can boost shareholder value with stock buybacks because of its surging free cash flow. In Q4, the company's free cash flow more than doubled from the prior-year period to $1.7 billion.
With ongoing double-digit bookings growth and surging profitability, I believe investors are being a little shortsighted with Uber stock today. I wouldn't be surprised to see Uber stock bounce back in short order.
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