Stock Skipz: Don't Invest in Uber Technologies...
At first glance, Uber seems like a no-brainer. However, there are more risks at hand than potential upsides. Here's why Uber doesn't fit Stock Pickz long term mindset...
StockPickz builds its strategy for finding great companies around metrics such as high return on equity (ROE), double-digit revenue growth, strong cash flow, low debt, innovative leadership, and wide moats that dominate their industries.
Inspired by legends like Warren Buffett, Peter Lynch, and Charlie Munger, we hold stocks for 5-10+ years, betting on businesses that grow steadily and weather storms. Today, we’re diving into why Uber Technologies (UBER), despite its household name, doesn’t make the cut for our long-term portfolio. Buckle up, because this ride has some red flags!
Uber’s Appeal: Why It Looks Tempting
I’ll be honest, it almost hurts me a little to add Uber to the Stock Skipz portfolio. Especially since it’s my “go-to” when I’m traveling. I sincerely like the product. As of late, they have had decent financials as well. However, there are deeper issues at hand.
At first glance, Uber seems like a no-brainer. It’s a global leader in ride-hailing, with a growing food delivery arm (Uber Eats) and a freight business. In 2024, Uber reported $44 billion in revenue, up 18% year-over-year.1 Its brand is iconic, and it operates in over 70 countries. For a growth investor, that sounds juicy, right? But when we apply our StockPickz principles, the cracks start to show. Let’s break it down.
Robotaxis: A Looming Threat to the Core Business
We prioritize companies with wide industry moats and market dominance, but Uber’s ride-hailing empire faces a massive disruptor: autonomous vehicles. Waymo, Tesla, and Cruise are pouring billions into robotaxis, which could slash labor costs but also commoditize Uber’s service. If anyone can offer a self-driving ride, what’s stopping customers from choosing the cheapest option?
Uber’s dipping its toes into autonomy through partnerships like Waymo, but it’s not leading the pack. Innovate or die, as Charlie Munger might say, and Uber’s heavy reliance on human drivers (80% of its cost structure) leaves it vulnerable. Our portfolio pick Tesla, with its AI-driven Full Self-Driving tech, is better positioned to dominate this shift. For Uber, robotaxis could mean a costly pivot or obsolescence, neither of which screams “long-term winner.”
A Shaky History: Trust Issues Linger
We value companies with trustworthy leadership and clean reputations. Uber’s past, however, is a bumpy ride. From “Greyball” (a tool to deceive regulators) to misclassifying drivers and surge-pricing controversies, Uber has burned trust with customers, drivers, and regulators. While CEO Dara Khosrowshahi has cleaned house since 2017, the brand still carries baggage. Here’s a list of its history on ethical violations:
God View: Uber’s “God View” tool allowed employees to track customers’ real-time locations without consent, including high-profile individuals, violating privacy until restricted in 2014 after public backlash.
Hell Program: Uber’s “Hell” program created fake Lyft rider accounts to spy on and poach Lyft drivers, using deceptive tactics to undermine a competitor until exposed in 2017.
Fake Ride Bookings: Uber employees booked and canceled thousands of fake Lyft rides in 2014 to disrupt Lyft’s service, harming drivers and customers in a bid to gain market share.
Misleading Driver Earnings: Uber settled a $20 million FTC case in 2017 for advertising inflated driver earnings and misleading vehicle financing terms, deceiving drivers to boost recruitment.
Ignoring Regulations and Aggressive Lobbying: Uber launched services without permits and used lobbying and a “kill switch” to evade regulators, as revealed in the 2022 Uber Files, undermining legal compliance.
Data Breaches and Cover-Ups: Uber paid hackers $100,000 to conceal a 2016 data breach affecting 57 million users, delaying disclosure for over a year, leading to a $148 million settlement in 2018.
Rides of Glory: In 2012, Uber analyzed user data to track “Rides of Glory,” identifying likely one-night stands, violating privacy and prompting backlash until the blog post was removed.
In our book, a company’s culture matters. Warren Buffett once said, “It takes 20 years to build a reputation and five minutes to ruin it,” and Uber has ruined it many times already. New scandals or regulatory backlash could tank Uber’s stock overnight. Compare that to our pick Intuit, with its squeaky-clean image and loyal customer base. Uber’s history makes it a gamble we’d rather skip.
Regulatory Risks: A Global Headache
Our strategy favors businesses with minimal regulatory overhang. Is high regulations a deal-breaker? Not necessarily. But combined with other factors laid out in this article, it just gives us another reason to be hesitant on Uber.
Uber, is a magnet for legal battles. Governments worldwide—from California to the UK—are cracking down on gig economy practices. Laws reclassifying drivers as employees could raise Uber’s costs by 20-30%, per some estimates. In 2024, California’s AB5 and similar EU rules forced Uber to rethink its model, squeezing margins further.
Add to that potential regulations on pricing, emissions, or data privacy, and Uber’s growth feels like a house of cards. We prefer companies like Monster Beverage, which faces fewer regulatory threats and grows steadily. Uber’s legal woes are a long-term drag we can’t ignore.
Economic Sensitivity: Not Recession-Proof
We love companies that thrive in any economy, like our pick Costco, which sells essentials people buy in rain or shine. However, Uber’s services—ride-hailing and food delivery—are discretionary. During recessions, consumers cut back on $20 rides or $15 burrito deliveries. With economic uncertainty looming in 2025 (think potential U.S. recession risks), Uber’s revenue could take a hit.
In Q1 2020, during the pandemic, Uber’s ride-hailing revenue dropped 80%. That’s not the resilience we want in a 10-year hold. Our portfolio’s Waste Management, by contrast, chugs along no matter the economy, because trash collection never stops.
Valuation: Paying a Premium for Risk
We’re disciplined about buying at reasonable valuations. Uber’s P/E ratio as of April 2025 is ~30, higher than the S&P 500’s 25 and peers like Lyft (~20).2 That premium assumes blockbuster growth, but analysts project Uber’s revenue growth slowing to ~11.9% CAGR through 2030, down from its historical 20%.3 With competition heating up and margins staying slim, the stock’s upside feels capped.
Charlie Munger taught us to avoid overpaying for growth. Our pick Shopify, with its 25%+ revenue growth and expanding moat, offers better bang for the buck. Uber’s valuation doesn’t match its risks, making it a pass for us.
Competition: No Moat, No Dominance
A wide moat is non-negotiable for StockPickz. Uber’s ride-hailing and delivery markets are brutally competitive. Lyft, Bolt, and Didi challenge rides, while DoorDash and Just Eat battle Uber Eats. In saturated markets like the U.S., growth is slowing, and emerging markets bring low margins and regulatory hurdles.
Without a clear edge—like Apple’s ecosystem or Airbnb’s network effect—Uber’s market dominance is shaky. Buffett would ask, “What stops a competitor from eating their lunch?” For Uber, the answer is: not much.
The Bottom Line: Why We’re Skipping Uber
Uber’s a household name with growth potential, but it doesn’t fit our StockPickz playbook. Thin margins, robotaxi threats, regulatory risks, economic sensitivity, a pricey valuation, fierce competition, and a checkered past make it a risky long-term bet. We’re not saying Uber’s doomed—its diversification into delivery and freight is promising—but it lacks the stability, moat, and financial strength we demand for a 5-10 year hold.
Could Uber prove us wrong? I certainly hope so! I personally like the company’s product, but can’t get over these barriers outlined here from an investment perspective.
Instead, stick with our portfolio stars like Waste Management, Apple, or Tesla, which check our boxes: high ROE, strong cash flow, wide moats, and innovation that lasts. Uber might be a short-term trade for some, but for long-term wealth, we’re steering clear.
What’s your take? Are you eyeing Uber or sticking to our tried-and-true picks? Drop us a line, and let’s keep the convo going! Until next time, happy investing, and stay picky!
https://finance.yahoo.com/news/uber-technologies-full-2024-earnings-132735851.html
https://www.gurufocus.com/economic_indicators/57/sp-500-pe-ratio
https://simplywall.st/stocks/us/transportation/nyse-uber/uber-technologies/future