On Feb. 5, San Francisco, CA-based Uber Technologies UBER, which provides ride-hailing, food delivery and freight (leasing vehicles to third parties) services through its Mobility, Delivery, and Freight segments, respectively, released impressive fourth-quarter 2024 results. The top and bottom lines beat expectations and rose from the corresponding quarter of 2023. Uber’s full-year 2024 revenues grew 18% to $44 billion

See the Zacks Earnings Calendar to stay ahead of market-making news.

The stock, however, fell 7.5% as investors shunned the company’s strong 2024 earnings performance. The weak guidance for first-quarter 2025 led to the southward movement of shares. The market’s reaction may be perceived as a golden buying opportunity. Let’s explore.

Highlights of UBER’s Q4 Earnings

 Uber’s fourth-quarter 2024 earnings per share of $3.21 outpaced the Zacks Consensus Estimate of 50 cents and improved more than 100% on a year-over-year basis. Total revenues of $11.9 billion beat the Zacks Consensus Estimate of $11.7 billion. The top line jumped 20.4% year over year on a reported basis and 21% on a constant currency basis.

With economic activities returning to normal levels in the post-pandemic scenario, people are traveling to work and other places as before. As a result, UBER’s Mobility business has been seeing buoyant demand, with segmental revenues increasing 25% in the December quarter.

With customer traffic picking up, gross bookings from the unit were highly impressive, aiding fourth-quarter results. Gross bookings from the Mobility segment in the December quarter increased 18% on a year-over-year basis to $22.8 billion.

Uber’s Delivery business also performed well in the quarter, with segmental revenues growing 21% year over year. Gross bookings from the Delivery segment in the December quarter rose 18% on a year-over-year basis to $20.1 billion.

Trips soared 18% to 3.1 billion or roughly 33 million trips per day on average. Monthly Active Platform Consumers increased 14% year over year to 171 million.

Guidance Hurts UBER Stock

Uber expects a strong dollar to hurt its first-quarter 2025 results. In the March quarter, gross bookings are anticipated to be in the $42 billion to $43.5 billion range, representing growth on a constant currency basis in the 17-21% band from first-quarter 2024 actuals. However, this wasn't enough to impress a market that was looking for a stronger momentum. 

The guidance includes an estimated 5.5 percentage point impact from a strong greenback.  It implies a roughly 7 and 4 percentage point currency headwind to Mobility and Delivery growth, respectively. Our estimate for first-quarter 2025 gross bookings is currently pegged at $43.6 billion.

Apart from currency headwinds, unfavorable winter weather might hurt trips and deliveries in the March quarter. The ride-hailing giant expects adjusted EBITDA in the $1.79 - $1.89 billion range, indicating 30% to 37% year-over-year growth. The projection also failed to satisfy investors.

Challenges to Uber’s Autonomous Vehicle Ambitions

Uber’s CEO Dara Khosrowshahi, on the fourth-quarter conference call, stated that while autonomous vehicle technology is advancing, commercialization will take significantly longer. Regulatory challenges may result in Uber taking longer to commercialize the autonomous vehicle business.

Currently, Alphabet’s GOOGL Waymo is the clear leader in the U.S. robotaxi space. Waymo has achieved significant milestones in the industry. Its commercial robotaxi services already operate in major cities like San Francisco, Phoenix and Los Angeles. Electric vehicle giant Tesla TSLA is a strong contender in the market, which is expected to grow rapidly in the coming years.

In fact, Uber shares have struggled of late due to robotaxi-related fears. Concerns that self-driving cars could eliminate intermediary services have been weighing on Uber shares lately, resulting in the stock declining in double-digits and underperforming its industry in the past three months.

UBER Stock 3-Month Price Comparison

Image Source: Zacks Investment Research

High Debt Levels of Uber

We are concerned about Uber’s high debt levels. Long-term debt has increased significantly from $5.7 billion at 2019-end.

Long-Term Debt to Capitalization

Image Source: Zacks Investment Research

UBER Shares Trade at a Premium

UBER stock is not cheap, as its Value Score of C suggests a stretched valuation at this moment.

In terms of price-to-earnings (forward 12-month), UBER is trading at 26.04X, higher than the industry’s 21.99X.

Image Source: Zacks Investment Research

How Should Investors Approach UBER Stock Now?

Despite the market's reaction to Uber’s first-quarter 2025 gross bookings guidance and headwinds like high debt, Uber's fundamentals remain strong. Even though Uber’s primary business is ridesharing, it has diversified into food delivery and freight over time. Diversification is imperative for big companies to reduce risks, and UBER has excelled in this area.  The company has engaged in numerous acquisitions, geographic and product diversifications, and innovations. Uber’s endeavors to expand into international markets are commendable and provide it with the benefits of geographical diversification. Prudent investments enable Uber to extend its services and solidify its comprehensive offerings.

Uber’s scale, targeted market expansions and diversification strategies position it well for long-term growth, supporting the idea that its high valuation may be justified. Given its solid long-term potential (UBER’s long-term earnings (three to five years) growth rate is 36%, way ahead of its industry’s 22%), retaining this Zacks Rank #3 (Hold) stock appears prudent. Meanwhile, new investors might consider waiting for a more attractive entry point. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Tesla, Inc. (TSLA) : Free Stock Analysis Report

Alphabet Inc. (GOOGL) : Free Stock Analysis Report

Uber Technologies, Inc. (UBER) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research