UBER – News and Insights

***the German media giant Axel Springer recently invested in Uber as the company continues to invest in the technology sector. Springer has been exploring ways to branch out beyond print media over the past few years. In 2012, it bought a stake in home-rental company Airbnb. It seems rather a financial than a strategic investment but underpins once more increased demand from European investors***
Uber faces several greenfield growth opportunities:
Ride sharing apps have a large and expanding market opportunity, and benefit from significant secular and demographic tailwinds. Uber has already established itself as a market leader in more than 75 countries and its business model has inherent network effects benefits.
Uber omnipresence enables the company to take share from consumer spend on public transportation, short term car rentals, car as a service, short-haul package delivery, long-haul ground transportation and core taxi-cab market.
Investment positives & upside catalysts to track:
Large and expandable addressable market: already a $650+ billion in market opportunity today and the potential to disrupt several industries involved in human and autonomous transportation.
Significant secular & demographic trends: at the intersection of Mobile, Technology, and Automobile industries coupled with favorable demographic, cultural, and behavioral changes associated with rising millennial population.
Uber has a dominant leadership position in ride-sharing: 76% of ride sharing app users use Uber most frequently and more than 70% of consumers who haven’t used ride-sharing apps are familiar with Uber’s brand name. In 2016 Uber exceeded 2 billion rides (5.5 mio. per day, 230’000 per hour)
Ride-sharing apps benefit from marketplace-style network effects inherent to most internet marketplaces.
Uber provides strong value proposition to consumers and drivers: on average, consumers take 2.3x trips per month and spend $15.10 per trip, with convenience & price as the top two reasons to choose Uber.
Uber has a solid board & management team.
Key risks & downside scenarios to monitor
Uber faces lots of direct, indirect, and emerging competition: pure play ride-sharing peers have raised significant capital and shown willingness to implement irrational economics near-term
Uber’s cost structure at scale remains unproven: based on hypothetical analysis it can envision a pathway for ride sharing companies to reach “high-teens” GAAP Op Margins. But, ongoing competition, legal costs, and ambitious long-term investments likely put a ceiling on near-term profitability
There are multiple, material potential legal and regulatory challenges
– Uber faces growing marketplace management risk
– Uber faces challenges associated with rising consumer expectations
Uber was founded in 2010. Its impressive growth story during the last six years is still in an early stage and we can expect from the company that it will expand in new fields of the transportation sector, soon. Yes, Uber is burning a lot of cash; USD 2.8 bn just in 2016. But at this stage of development, Uber needs to push aggressively forward and has to invest heavily in its business model to conquer new markets and to consolidate established market shares against new competition. To remain the ultimate leader in the ride sharing service industry, marketing and service quality is key and Uber is working hard to increase consumer satisfaction and to optimize the paying schemes for drivers. It is clear that in the near future, Uber will have enough market power to optimize their quite aggressive pricing model, which will have a very positive effect on the revenue streams.
Disclaimer: All above information are publicly available and no responsibility is taken for the correctness of this information. This newsletter is for informational purposes only and does not constitute an offer to sell or a solicitation of an offer to purchase any interest in any product. Any such offer or solicitation shall be made only to non-retail investors by means of a confidential legal document and only in those jurisdictions where permitted by law

May 2017