5 ms·

If you're planning on buying Uber stock can you walk me through your reasoning?

alfalfasprout 7y ago
What's the future? There's no guarantee autonomous vehicles will work at scale well in the next 10 years. Even if they do, ATG is behind its competitors and losing talent. The rest of their business except uber eats is bleeding money... and Uber eats is only sustainable if they keep human drivers that can actually pick up/hand off orders.
- deleted 7y ago
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draw_down 7y ago
Greater fool theory can work regardless of whether you believe in the business.
panarky 7y ago
How big is the worldwide market for 1) personal transportation, 2) package and parcel delivery, and 3) 30-minute delivery of prepared foods, groceries, pharmaceuticals, auto parts, etc.? Can Uber capture 10% of that combined market opportunity with the efficiencies that come from globally optimized routing of all those trips? Can Uber inside-out the company so others can execute on its platform, with Uber taking a cut? If so, then an $80 billion present value seems low.
- shereadsthenews 7y ago
  Congratulations you have just committed the elementary Chinese Soda fallacy.
  - parhamn 7y ago
    While I knew what you were implying, I wanted to see if this was actually a common term. It isn't but it did lead me to another HN comment [1] and this Fast Company article referring to is as "Chinese Math" [2]. Just an FYI for anyone else because this sort of "1% of x market" thing comes a lot and a term is helpful to speed up the convos. [1] https://news.ycombinator.com/item?id=10735610 https://news.ycombinator.com/item?id=10735610 [2] https://www.fastcompany.com/1710460/chinese-math-or-1-mistake-cripples-100-entrepreneurs https://www.fastcompany.com/1710460/chinese-math-or-1-mistak...
    - ghaff 7y ago
      I consulted for someone once to do some market sizing among other things. They were determined to make a case around winning 10% or whatever for the worldwide market for X.
    - SilasX 7y ago
      I didn't know the term for it [1], but yes, I had long since started checking out whenever someone starts to appeal to "if we can just get n% of <huge market>". [1] Even "Chinese Soda" has not entered common usage enough to justify calling it "the" or "a standard" term for it.
      - panarky 7y ago
        The "Chinese math" fallacy is only fallacious when it hides how difficult it is to steal a small percentage of a giant established market. How exactly does the "fallacy" apply to Uber, a company that thoroughly understands how difficult it is to carve a big chunk out of entrenched competitors? Since they've already demonstrated the ability to steal a sizable percentage of the taxi and car rental markets, it's good for Uber that they didn't listen to all the smart guys on HN.
        SilasX 7y ago
        >The "Chinese math" fallacy is only fallacious when it hides how difficult it is to steal a small percentage of a giant established market. Which is what I was using it for. >How exactly does the "fallacy" apply to Uber, a company that thoroughly understands how difficult it is to carve a big chunk out of entrenched competitors? To clarify, that part is not the problem with the comment. That is a legit argument for why Uber can justify its valuation. The problem is trying to amplify the persuasiveness of the argument by appealing to "small percent of huge = big". That deceptively makes the argument more appealing than it deserves to be, and is a lazy form of justifying a valuation. It plays tricks with human intuition on big numbers to (as you note) underplay the difficulty of getting a small number. Hence why it's a "reach for my revolver" type situation. Be careful not to equate "they have, independently of this argument, a good case here" with "therefore it's not the Chinese Soda fallacy to mention the percentages."
- celticninja 7y ago
  They have been going a decade, they havent turned a profit yet, in fact they have been burning through capital. What is going to change in the next decade that means they will return a profit consistently enough that either dividend payout will occur or a higher share price will be achieved? Seems to me that as soon as Uber find out how to turn a profit thats when copycats can jump on board with their app and start taking a slice of ubers cake. Afterall they wont have long term investors to repay so their prices could be lower than Ubers, making the value proposition of uber even worse.
  - djakjxnanjak 7y ago
    What makes you think they are even trying to make a profit? Uber has investors willing to throw billions at them to spend on growth, why wouldn’t they take it?
    - bduerst 7y ago
      Going public means a different strategy for the board. Up until this point Uber has been a hot investment ticket for VCs, and the existing investors have been incentivized to pump up the valuation to improve their position. This strategy involves self-driving cars and helicopters and edgy vaporware - basically creating these tactical hype moments for the Uber brand. Now with public investors, the hype strategy isn't sustainable and the board will need to turn a profit (eventually) or be ousted by public owners who don't want to see their shares in a company be destroyed.
    - kopos 7y ago
      Going public brings a different set wof eyes to the table and more scrutiny and lesser patience from the public. That’s why. The story of being a loss leader is not taken kindly
  - sonnyblarney 7y ago
    To be fair it's the unit economics that you'd want to look at, not the timeframe. If their goal is to go very global, very quickly, it'll take more than a decade of burn. If the unit numbers work in established cities, and they are spending on direct expansion, then it's good. That said, much of their 'expansion' has been into other things, and their unit economics are questionable, though on the later ... when Lyft and Uber settle down into a nice duopoly in most cities prices will inch up a little bit if need be.
- oarabbus_ 7y ago
  This has to do with Uber's viability as an app/tech platform, which is very different than share appreciation of a public company. Uber is a smart(er) taxi service that doesn't own any fleets of vehicles, or anything else really, and operates at a loss. Uber may not faceplant quite as badly, but look to Lyft's IPO to see what's likely in store for them. This IPO screams "cash out and give the bags to retail investors"
- Gys 7y ago
  Where I live, in Europe, we have now Uber, Mytaxi, Bolt (prev Taxify) and Cabify. Not sure if there are even more. I regularly switch between them (to make sure their algoritmes think I am a critical user = lower pricing). Then there are also electric bikes and electric scooters (4 or 5 platforms). And there is DriveNow, a on demand rental offering of BMW. Just saying: local competition seems 'too easy' (as platform one could even use libretaxi.org or tagmytaxi.com) The question is not how much market share, but how much sustainable profit they can make. In the mobile phone market there are several bigger suppliers that are making no profit. Another thing to keep in mind: VC's and other investors are in it for the money. If there was more money to be made by keeping the company private, they certainly would do that. They decided to do a IPO because it will make them more money then not doing an IPO.
WDCDev 7y ago
I am not buying stock, but a business model that could work is renting out a percentage of their capacity to companies/startups that need to deliver goods or services to customers' homes. I also don't believe self-driving will be anything more than tech stuck in R&D for the next 10 years. If I were an investor have preferred Uber sell ATG before this IPO.
jmharvey 7y ago
I own broad index funds. I expect that at some point, Uber will be added to the index that the funds track, so the funds will buy Uber. The basic reasoning here just boils down to market consensus that Uber is worth $x billion, and I don't really have any reason to think that I can outguess the market consensus.
dpandya 7y ago
On the flipside: if you're a person that's convinced Uber should be valued at a fraction of what it is and you're not shorting it, why aren't you? You might argue the market will remain irrational, but this is unlikely to be the case for 25+ years. This should mean that most people set against the Uber IPO should hold a short position with at least a small portion of their net worth. Doesn't seem like this is the case.
- deleted 7y ago
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- YjSe2GMQ 7y ago
  You can't easily short Uber yet, it is not traded yet. You'd need to find a) a current stockholder that will borrow you shares, and b) a new potential stockholder to buy it from you. And even after it starts trading it'll take a few days for options and shorts to become available. Tip: if you want to short via options (when options trading becomes available) wait a few hours to let the market makers settle their positions. Source: I've shorted BYND and paid a higher than necessary options premium because I was impatient.
- b_tterc_p 7y ago
  Bearish because an upcoming recession seems likely to have three effects 1) make money more expensive and harder to justify subsidizing rides 2) increase the supply of drivers. 3) decrease the demand Less demand, more supply, but possibly higher overall prices due to subsidy withdrawal feels like a dangerous thing On top of that regulatory pressure to treat drivers as employees could decimate Uber at any moment. Not shorting because gambling on the stock market is not worth the effort. God could declare the true present value of a company’s future cash flows to be $10/share and I still wouldn’t count on the market to get it right- among other bothers.

What's the future? There's no guarantee autonomous vehicles will work at scale well in the next 10 years. Even if they do, ATG is behind its competitors and losing talent. The rest of their business except uber eats is bleeding money... and Uber eats is only sustainable if they keep human drivers that can actually pick up/hand off orders.

deleted 7y ago
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deleted 7y ago
[deleted]

draw_down 7y ago

Greater fool theory can work regardless of whether you believe in the business.

panarky 7y ago

How big is the worldwide market for 1) personal transportation, 2) package and parcel delivery, and 3) 30-minute delivery of prepared foods, groceries, pharmaceuticals, auto parts, etc.? Can Uber capture 10% of that combined market opportunity with the efficiencies that come from globally optimized routing of all those trips? Can Uber inside-out the company so others can execute on its platform, with Uber taking a cut? If so, then an $80 billion present value seems low.

shereadsthenews 7y ago
Congratulations you have just committed the elementary Chinese Soda fallacy.
- parhamn 7y ago
  While I knew what you were implying, I wanted to see if this was actually a common term. It isn't but it did lead me to another HN comment [1] and this Fast Company article referring to is as "Chinese Math" [2]. Just an FYI for anyone else because this sort of "1% of x market" thing comes a lot and a term is helpful to speed up the convos. [1] https://news.ycombinator.com/item?id=10735610 https://news.ycombinator.com/item?id=10735610 [2] https://www.fastcompany.com/1710460/chinese-math-or-1-mistake-cripples-100-entrepreneurs https://www.fastcompany.com/1710460/chinese-math-or-1-mistak...
  - ghaff 7y ago
    I consulted for someone once to do some market sizing among other things. They were determined to make a case around winning 10% or whatever for the worldwide market for X.
  - SilasX 7y ago
    I didn't know the term for it [1], but yes, I had long since started checking out whenever someone starts to appeal to "if we can just get n% of <huge market>". [1] Even "Chinese Soda" has not entered common usage enough to justify calling it "the" or "a standard" term for it.
    - panarky 7y ago
      The "Chinese math" fallacy is only fallacious when it hides how difficult it is to steal a small percentage of a giant established market. How exactly does the "fallacy" apply to Uber, a company that thoroughly understands how difficult it is to carve a big chunk out of entrenched competitors? Since they've already demonstrated the ability to steal a sizable percentage of the taxi and car rental markets, it's good for Uber that they didn't listen to all the smart guys on HN.
      - SilasX 7y ago
        >The "Chinese math" fallacy is only fallacious when it hides how difficult it is to steal a small percentage of a giant established market. Which is what I was using it for. >How exactly does the "fallacy" apply to Uber, a company that thoroughly understands how difficult it is to carve a big chunk out of entrenched competitors? To clarify, that part is not the problem with the comment. That is a legit argument for why Uber can justify its valuation. The problem is trying to amplify the persuasiveness of the argument by appealing to "small percent of huge = big". That deceptively makes the argument more appealing than it deserves to be, and is a lazy form of justifying a valuation. It plays tricks with human intuition on big numbers to (as you note) underplay the difficulty of getting a small number. Hence why it's a "reach for my revolver" type situation. Be careful not to equate "they have, independently of this argument, a good case here" with "therefore it's not the Chinese Soda fallacy to mention the percentages."
celticninja 7y ago
They have been going a decade, they havent turned a profit yet, in fact they have been burning through capital. What is going to change in the next decade that means they will return a profit consistently enough that either dividend payout will occur or a higher share price will be achieved? Seems to me that as soon as Uber find out how to turn a profit thats when copycats can jump on board with their app and start taking a slice of ubers cake. Afterall they wont have long term investors to repay so their prices could be lower than Ubers, making the value proposition of uber even worse.
- djakjxnanjak 7y ago
  What makes you think they are even trying to make a profit? Uber has investors willing to throw billions at them to spend on growth, why wouldn’t they take it?
  - bduerst 7y ago
    Going public means a different strategy for the board. Up until this point Uber has been a hot investment ticket for VCs, and the existing investors have been incentivized to pump up the valuation to improve their position. This strategy involves self-driving cars and helicopters and edgy vaporware - basically creating these tactical hype moments for the Uber brand. Now with public investors, the hype strategy isn't sustainable and the board will need to turn a profit (eventually) or be ousted by public owners who don't want to see their shares in a company be destroyed.
  - kopos 7y ago
    Going public brings a different set wof eyes to the table and more scrutiny and lesser patience from the public. That’s why. The story of being a loss leader is not taken kindly
- sonnyblarney 7y ago
  To be fair it's the unit economics that you'd want to look at, not the timeframe. If their goal is to go very global, very quickly, it'll take more than a decade of burn. If the unit numbers work in established cities, and they are spending on direct expansion, then it's good. That said, much of their 'expansion' has been into other things, and their unit economics are questionable, though on the later ... when Lyft and Uber settle down into a nice duopoly in most cities prices will inch up a little bit if need be.
oarabbus_ 7y ago
This has to do with Uber's viability as an app/tech platform, which is very different than share appreciation of a public company. Uber is a smart(er) taxi service that doesn't own any fleets of vehicles, or anything else really, and operates at a loss. Uber may not faceplant quite as badly, but look to Lyft's IPO to see what's likely in store for them. This IPO screams "cash out and give the bags to retail investors"
Gys 7y ago
Where I live, in Europe, we have now Uber, Mytaxi, Bolt (prev Taxify) and Cabify. Not sure if there are even more. I regularly switch between them (to make sure their algoritmes think I am a critical user = lower pricing). Then there are also electric bikes and electric scooters (4 or 5 platforms). And there is DriveNow, a on demand rental offering of BMW. Just saying: local competition seems 'too easy' (as platform one could even use libretaxi.org or tagmytaxi.com) The question is not how much market share, but how much sustainable profit they can make. In the mobile phone market there are several bigger suppliers that are making no profit. Another thing to keep in mind: VC's and other investors are in it for the money. If there was more money to be made by keeping the company private, they certainly would do that. They decided to do a IPO because it will make them more money then not doing an IPO.

WDCDev 7y ago

I am not buying stock, but a business model that could work is renting out a percentage of their capacity to companies/startups that need to deliver goods or services to customers' homes. I also don't believe self-driving will be anything more than tech stuck in R&D for the next 10 years. If I were an investor have preferred Uber sell ATG before this IPO.

jmharvey 7y ago

I own broad index funds. I expect that at some point, Uber will be added to the index that the funds track, so the funds will buy Uber. The basic reasoning here just boils down to market consensus that Uber is worth $x billion, and I don't really have any reason to think that I can outguess the market consensus.

dpandya 7y ago

On the flipside: if you're a person that's convinced Uber should be valued at a fraction of what it is and you're not shorting it, why aren't you? You might argue the market will remain irrational, but this is unlikely to be the case for 25+ years. This should mean that most people set against the Uber IPO should hold a short position with at least a small portion of their net worth. Doesn't seem like this is the case.

deleted 7y ago
[deleted]
YjSe2GMQ 7y ago
You can't easily short Uber yet, it is not traded yet. You'd need to find a) a current stockholder that will borrow you shares, and b) a new potential stockholder to buy it from you. And even after it starts trading it'll take a few days for options and shorts to become available. Tip: if you want to short via options (when options trading becomes available) wait a few hours to let the market makers settle their positions. Source: I've shorted BYND and paid a higher than necessary options premium because I was impatient.
b_tterc_p 7y ago
Bearish because an upcoming recession seems likely to have three effects 1) make money more expensive and harder to justify subsidizing rides 2) increase the supply of drivers. 3) decrease the demand Less demand, more supply, but possibly higher overall prices due to subsidy withdrawal feels like a dangerous thing On top of that regulatory pressure to treat drivers as employees could decimate Uber at any moment. Not shorting because gambling on the stock market is not worth the effort. God could declare the true present value of a company’s future cash flows to be $10/share and I still wouldn’t count on the market to get it right- among other bothers.