Shares of Uber Technologies (UBER -1.67%) have been nosediving this month as investors worry about rising competition and the company’s long-term growth prospects. As of this writing, the stock has declined 2% year to date and is down about 30% from its all-time high.
Is this a great buying opportunity for investors, or are shares of Uber likely headed even lower?
Investors are bearish on Uber stock
Uber stock’s recent tumble began on Dec. 5 when Alphabet‘s Waymo announced it would be expanding to Miami. The self-driving vehicles could be available for ride-hailing services as early as 2026.
The possibility of robotaxis becoming available in one of the largest cities in the U.S. appears to be weighing on investors, with fears mounting that it could hurt demand for Uber rides. Waymo is already available in multiple cities, including Austin, Los Angeles, Phoenix, and San Francisco.
This recent expansion news underscores the potential for Waymo to disrupt Uber’s dominance in the ride-hailing industry. Waymo’s growth, when combined with electric-vehicle maker Tesla‘s plans to produce robotaxis in 2026, highlight the biggest risk facing Uber in the near future: new competition.
Is the robotaxi risk overblown?
Robotaxis are a risk for Uber, but it’s arguably still a bit too early to be worried about them, given the uncertainty that driverless vehicles face. High costs, regulatory hurdles, and already congested roads in many U.S. cities are just some of the possible impediments that could weigh on the rollout of the technology. This is also why Ford CEO Jim Farley isn’t convinced they’ll be the game changers many investors expect them to be.
And while Waymo is growing, it’s still fairly small in size. It’s reporting around 150,000 trips per week, while Uber is averaging 31 million trips per day. Besides the initial novelty, it’s too early to tell how much of a dent Waymo and similar services will ultimately put into Uber’s business over the long haul.
Uber’s business is still growing fast and much more profitable
What should matter to investors are the company’s actual results and growth prospects. What’s encouraging is that while Uber’s growth rate has slowed in recent years, it remains fairly strong at around 20%.
Data by YCharts.
More importantly, the company has become highly profitable and is now a more investable business overall. For the three-month period ended Sept. 30, the company’s operating income totaled $1.1 billion, a huge improvement from the $394 million it reported in the prior-year quarter.
Should you buy Uber stock today?
Uber’s sell-off has put the stock’s valuation at a fairly modest multiple of 30 times its trailing earnings. And based on analysts’ expectations, it’s trading at 19 times next year’s profit, which is quite attractive for a business growing like this one. It’s even a discount to the S&P 500‘s average forward price-to-earnings multiple of 22.
The fear surrounding robotaxis is a bit overblown, given their still modest market share and lingering questions regarding the technology. This may be a good time for investors to consider buying shares of Uber as the company has been achieving strong results at a more tenable valuation. It may have a lot of upside for investors who buy the growth stock today.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Tesla, and Uber Technologies. The Motley Fool has a disclosure policy.
