Bill Ackman is Glazing Uber-Is It Worth a Buy?

It is fair to say that Bill Ackman is a controversial figure. He burst onto the scene as part of an aggressive, tech-heavy crop of young-ish managers who all did pretty well, catching the climb back up following ‘08. He immediately rose to prominence, even beyond his clique, as he became famous for his dramatics. He was beefing with Carl Icahn on CNBC after Icahn basically screwed Ackman, he has always been quite active on Twitter, he got the dean of Harvard pushed out, and he tried to start a Berkshire Hathaway-esque fund that fell on its face so quickly that it never made it out of the starting blocks. Some have said that Billy has become distracted and that he has lost his touch. Some would say that he never had much of a touch to begin with. And I say that he has great hair.

Either way, you slice it, Bill has great hair, and he is super into Uber. Bill recently bought quite a sizable chunk of Uber and got very vocal on Twitter (shocker) about his new position.

Uber is a stock that I used to own, mostly during the Pandemic. I sold because I was an idiot who did not know what he was doing. That said, I have kept my eye on them generally, as they are a really interesting business.

Bill published his case for Uber online, which he often does. We’re going to go through and review it. Bill said that Uber is the “World’s leading rideshare and delivery (Uber Eats) marketplace.”

So right off the bat, we have an error. Uber is the world’s leading rideshare service, but they are not the leading food delivery service, as Uber Eats is dwarfed by DoorDash.

Then, Billy mentions Uber’s customer base. Uber has 178 million users, with 170 million of them being customers and 8 million as drivers. That is a lot of customers obviously, and Uber is continuing to expand, especially in overseas locations, with intl. business accounting for over half of total bookings.

Billy goes on to mention the management team. Now, Dara Khosrowshahi, the CEO of Uber is someone I have long admired, and I think the Uber management team is one of their most prominent pros, one of their best possessions. Dara replaced Travis Kalanick, who was a great founder, admittedly, but he was also pretty much a child, and he displayed a lot of immaturity in leadership. Dara is a professional, high-quality leader who led Expedia to record revenues before jumping ship. Bill Ackman used the word “disciplined” to describe Uber under Dara, and I think that is fairly accurate.

Under Dara, Uber is projecting high-teen annual revenue growth, annual EPS growth of 30%, and margin growth on a similar level. Then, Billy asserts that the reason Uber’s price is depressed, which is a tough assertion to make because the p/e is over 29, is because of autonomous vehicles, and that they do not pose as great of a threat as the market believes.

This is really the crux of the Uber argument, taking the risk that autonomous vehicles are not an existential threat to them. And this is something I am not quite so sure about. I think, theoretically, Uber can re-position themselves as a middle-man, something that their partnership with Waymo in Texas shows. However, that is a really tenuous and weak position to be in.

At best, Waymo and autonomous vehicles are a serious inhibitor of Uber’s business, and at worst, they will put Uber out of business altogether.

All of Uber’s numbers are spectacular, and they point towards a bright future, but AVs are too much of a limiting factor, if just for the fear that investors feel because of them.

I do not think Uber is a buy for me. In fact, I would not hold this company at all, but a lot of that is due to their clashing with my strategy of favoring monopolistic companies that can build on their advantages. Uber remains a tantalizing company, but their threats are too many, so they are not right for me.