Last year, the share prices of ride-hailing technology companies Uber Technologies (NYSE:UBER) The increase is about 9%. This performance is much lower than S&P 500 Index and Nasdaq Composite Indexbut I won’t be logging off of Uber so soon.
Below, I'll break down the situation for Uber stock and explain why I think the stock is poised for a healthy rebound in 2025. In fact, I think Uber will be worth more than the top companies in the S&P 500 by the end of this year - stocks that will perform well in 2024, Palantir Technology (NASDAQ: PLTR).
The last year has been a lot of highs and lows for Uber investors. Through August and September, Uber's stock price was actually down about 7% year over year. However, the stock rebounded quickly, rising as much as 37% by October. It wasn't until December that Uber's stock price really started to plummet.
The culprit behind Uber’s sell-off? Concerns surrounding self-driving fleets. Specifically, in early December, letterWaymo's self-driving car subsidiary announced that it is partnering with a startup called Moove to help manage its self-driving fleet. Considering that Uber is a major player in the ride-hailing space, investors must be confused as to why Waymo is partnering with other companies.
While I understand why investors might view Waymo's decision to partner with Moove as disastrous for Uber, there's still a lot to consider before hitting the panic button.
First of all, Uber is a diversified company. While ride-sharing is its largest revenue source, the company also operates a delivery platform focused on alcohol and food delivery through properties such as Drizly and Postmates. In addition, Uber operates in more than 70 countries around the world.
Considering that self-driving fleet adoption is still incredibly nascent, it's unlikely that Waymo or any other robotaxi operator will replace Uber's mobility business overnight.
Finally, robotaxi fleets may be rolled out city by city over a long period of time. Therefore, Uber has huge potential to compete with Waymo or Teslathere may be strategic benefits to partnering with Uber in specific urban settings.
As of January 16, Palantir's market capitalization was approximately $160 billion. In terms of valuation multiples, this translates to a price-to-sales (P/S) ratio of 62 and a price-to-earnings (P/E) ratio of 341.
By comparison, Uber's price-to-earnings ratio is only 3.4 and its price-to-earnings ratio is 33, hovering near historical lows. The subtle idea here is that nothing actually changed about Uber's fundamentals. Instead, the current sell-off is driven by claims that competition in self-driving cars will eat into Uber's market share in ride-hailing. However, despite competition from Waymo and Tesla, the idea has yet to fully take off, let alone reach any significant scale.
I think investors will realize that Uber remains well-positioned for long-term growth in all aspects of the mobility market. I think the stock will fall back into investor favor and rebound in a meaningful way in 2025.
Although Palantir has proven itself to be a top player in artificial intelligence (AI), investor expectations are now high. I highlighted this concept in the extended valuation metric I mentioned above. In my opinion, Palantir's current rate of valuation expansion is unsustainable and the stock will see some degree of normalization or correction.
For these reasons, I think Uber will be a more valuable business than Palantir by the end of this year.
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Suzanne Frey is an Alphabet executive and a board member of The Motley Fool. Adam Spatacco has worked at Alphabet, Palantir Technologies and Tesla. The Motley Fool owns and recommends Alphabet, Palantir Technologies, Tesla and Uber Technologies. The Motley Fool has a disclosure policy.
Prediction: This troubled stock will rebound and be worth more than Palantir by the end of 2025 Originally published by The Motley Fool