Bill Ackman is one of the most widely followed investment managers in the world. He's in charge of Pershing Square Capital, a hedge fund focused on investing in just a handful of Ackman's best ideas. His highly concentrated portfolio is full of great companies, but he might have just made one stock the biggest holding at Pershing Square.

Starting in January, Ackman and his team strategically acquired 30.3 million shares of Uber Technologies (UBER 5.40%). Those shares are worth over $2.3 billion as of this writing, as the news of Ackman's position sent shares higher. Based on Pershing Square's positions disclosed in its most recent 13-F filing (as of Sept. 30) with the Securities and Exchange Commission, Uber could now be Pershing Square's largest equity holding.

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Ackman loves the management and thinks it's undervalued

In a post on X revealing his position, Ackman praised Uber CEO Dara Khosrowshahi. He said Khosrowshahi "has done a superb job in transforming the company into a highly profitable and cash-generative growth machine."

Indeed, since getting behind the wheel as Uber CEO in 2017, the company has gone from burning $1.5 billion in cash per year to generating over $7 billion in operating cash flow in 2024. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) went from negative $2.6 billion in 2017 to positive $6.5 billion in 2024. It's also been profitable on a generally accepted accounting principles (GAAP) basis since 2023.

And Ackman thinks there's still a lot of growth left to come for Uber. "Remarkably, it can still be purchased at a massive discount to its intrinsic value," he wrote.

Even after the increase in share price following Ackman's announcement, Uber shares trade for an enterprise value of 0.9 times its 2024 gross bookings. Management expects gross bookings to grow 18% in the first quarter of 2025 as well. Enterprise value-to-EBITDA, a more traditional valuation measure, has shares trading at a multiple of less than 18 times analysts' 2025 expectations. Management expects 30% to 37% growth in EBITDA in the first quarter.

Uber's management has done a great job of steering the company toward profitability and driving it forward. The stock valuation looks attractive as well. Importantly, it has a big competitive advantage that should protect it from competition entering the market in the future.

Owning the biggest and best in the industry

One thing Khosrowshahi has done at Uber is transform the company from a company focused primarily on ride-sharing to one that matches customers with drivers to move anything from point A to point B. The company also folded Uber Eats into the main Uber app and made several strategic acquisitions in delivery and logistics.

The results have been phenomenal. Since Khosrowshahi took over in 2017, Uber has grown from 62 million monthly active platform consumers to 171 million as of the end of 2024. That customer base has attracted more restaurants, stores, and drivers to its platform, in turn making Uber more useful for customers and spinning the flywheel faster.

As a result, it's taken share from smaller rival Lyft over the last few years despite already being much larger. And Uber's size advantage should continue to push its market share higher. There's a good reason Uber's valuation is higher than Lyft's.

Many see autonomous vehicles (AVs) as a threat to Uber, but Uber's position as the ride-hailing app could make it an indispensable part of the AV ecosystem. If a company like Alphabet's Waymo wants to serve a new market, its easiest path forward is to partner with Uber. And that's exactly what it's doing this year in Austin and Atlanta. There's no need for an AV company to partner with a smaller network operator like Lyft.

So, not only does Uber look undervalued based on its current position in the ride-sharing industry, but it could also see its position cemented as the market shifts to more AVs in search of riders. As such, it may be worth following Ackman into the stock, even after the price spiked on the news of his purchase.