Spotlight on Stocks: The Billionaire Investors Eyeing Uber Technologies

Keeping track of billionaire investors can provide significant insights for retail investors. These money managers often have outstanding performance records and insights into market trends. Each quarter, they are required to disclose their stock holdings, giving regular investors an opportunity to analyze their strategies, identify new investment ideas, and revisit their investment theses.

It’s essential for investors to conduct their own research, as there can be various reasons behind a money manager’s buying or selling decisions. Professional investors, while highly skilled, can still make mistakes. Recently, however, there has been notable interest in an artificial intelligence (AI) stock that is also generating substantial free cash flow. Let’s delve into the situation surrounding Uber Technologies.

The Evolution of Uber Technologies

Uber Technologies (UBER -1.08%) has been a major player in the tech space, creating an entirely new industry when it launched. However, since its IPO in 2019, Uber has faced numerous challenges, including regulatory hurdles and heightened competition, which have impacted its profitability.

Strategic Changes Under Leadership

In response to these challenges, Uber has streamlined its operations. Under CEO Dara Khosrowshahi—who took over in 2017—the company has implemented strategies that have begun to yield dividends. This positive trajectory has not gone unnoticed by leading billionaire investors:

• Billionaire David Tepper of Appaloosa Management first invested in Uber in 2021 and has adjusted his holdings over time. After significant sales in late 2023 and early 2024, Tepper resumed purchasing shares in the latter part of 2024.
• Meanwhile, billionaire Bill Ackman from Pershing Square Capital has recently acquired 30.3 million Uber shares, amounting to a $2.37 billion investment, which may now be the largest position in his portfolio.

Financial Performance and Promising Projections

Ackman lauded Khosrowshahi’s tenure and characterized Uber as “a highly profitable and cash-generative growth machine” that remains undervalued. In 2024, Uber reported earnings of $9.86 billion, with free cash flow (FCF) rising to nearly $6.9 billion, up from $3.36 billion in 2023. The FCF margin reached 15.7%, evidencing solid operational management and continued investment potential. The total number of trips taken via Uber also spiked by 19% in 2024.

AI and Autonomous Vehicle Opportunities

With the surge in interest in AI, Uber is poised to capitalize on opportunities within the autonomous vehicle (AV) sector. The company believes the AV market in the U.S. alone holds a potential value of $1 trillion. Nevertheless, Uber acknowledges that significant challenges—including safety record verification and scalable hardware deployment—must be addressed before widespread commercialization occurs.

Building Strategic Partnerships

Uber’s strategy involves forming collaborations with AV firms like WayMo and WeRide. The company is set to begin testing autonomous vehicles within its existing fleet, leveraging its extensive experience in ride-sharing to navigate the complexities related to safety, operations, and customer interactions.

Conclusion: A Stock to Watch

Bill Ackman’s assertion that Uber possesses “rare” qualities seems accurate, as evidenced by its robust financial metrics, increasing profitability, and promising growth. Investing in Uber not only represents a strong position in the burgeoning AV market but also suggests potential for significant returns as the sector develops. With a valuation of 24 times forward earnings, Uber presents an intriguing opportunity that many investors may want to consider as they explore promising stocks in the AI sector.

Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Uber Technologies. The Motley Fool has a disclosure policy.