Chit Chat Stocks - Uber Stock: Why This Investor Thinks There Is Still Massive Upside From Here (Ticker: UBER)

Episode Date: January 21, 2026

On this episode of Chit Chat Stocks, Aria Radnia stops by to discuss his thesis on Uber (Ticker: UBER). We discuss: (00:00) Introduction (02:24) Understanding Uber's Revenue Streams (03:51) Geographic Diversification and Growth Opportunities (08:15) The Autonomous Vehicle Threat and Opportunity (30:17) Profitability of Uber Eats (31:03) Uber's Expansion into Grocery and Retail (33:36) Advertising Revenue: A Key to Profitability (37:43) Exploring Uber's Moonshot Projects (42:51) Uber's Investment Portfolio and Market Penetration (49:18) Valuation Insights and Future Growth Aria's Twitter: https://x.com/QualityInvest5 Aria's YouTube: https://www.youtube.com/@QualityInvest5 ***************************************************** Sign up for our stock research service, Emerging Moats: emergingmoats.com  ********************************************************************* Chit Chat Stocks is presented by Interactive Brokers. Get professional pricing, global access, and premier technology with the best brokerage for investors today:  https://www.interactivebrokers.com/  Interactive Brokers is a member of SIPC.  ********************************************************************* Fiscal.ai is building the future of financial data. With custom charts, AI-generated research reports, and endless analytical tools, you can get up to speed on any stock around the globe. All for a reasonable price.  Use our LINK and get 15% off any premium plan: ⁠https://fiscal.ai/chitchat  ********************************************************************* Disclosure: Chit Chat Stocks hosts and guests are not financial advisors, and nothing they say on this show is formal advice or a recommendation. Learn more about your ad choices. Visit megaphone.fm/adchoices

You research your investments, but there's one thing most investors don't research enough. Their broker. In 2025, IBKR retail clients averaged a 19.2% return, beating the S&P 500's 17.9%. The broker you choose matters. IBKR's lower costs, competitive rates, and global access helped investors put capital to work efficiently. Learn why the best-informed investors choose interactive brokers at ibkr.com slash 2025. Welcome to Chit Chat Stocks.

On this show, hosts Ryan Henderson and Brett Schaefer analyze businesses and riff on the world of investing. As a quick reminder, Chit Chat Stocks is a CCM Media Group podcast. Anything discussed on Chit Chat Stocks by Ryan, Brett, or any other podcast guest is not formal advice or recommendation. Now, please enjoy this episode. Welcome into Chit Chat Stocks, a podcast to help you find your next great investment. Today we bring back on newly recurring guest, Arya Radnya, who has worked with Ryan at Fiscal

AI, is a young investor. I feel old finally being able to say that. We have some people on that are finally younger than us, with some great YouTube content at his personal channel, as well as Twitter, talking stuff like, I'm just scrolling through right now. Adobe, ServiceNow, ASML, Zeta, which is a company that we'd like to look at at some point. So a lot of stuff on timely, you know, stocks that are soaring, stocks that are falling, lots of fundamental analysis. But today, we're talking one of, I believe, your largest positions, if not largest positions in your portfolio. It's turned into a bit of a battleground stock.

Uber Technologies, or just Uber, we plan to discuss the overall business, autonomous vehicles opportunities and threats there the delivery business moonshots overall industry tailwinds geographical diversification and his opinion on the stock so aria that's a long intro welcome to the show i'm going to kick things off with a question as we kind of go for a broad overview of the business uber is a well-known brand many people have known them for over a decade now. But as we sit here in Q1 2026, what is driving this business today? Yeah, I mean, first of all, thank you guys for having me back on. I joked offline with Brett that fastest reoccurring guest on the podcast history. But yeah, in terms

of what is driving the business today, and maybe Ryan, if you'd like to pull the chart up, but segment wise, if we're talking about it, I believe roughly 60% of the revenues of the business today do come from that mobility segment. About 35% of the revenues of the company come from the each segment or the delivery segments. And then you do have this bit of a freight segment, roughly making up 5% to 10%, give or take. The core of the business kind of grows at north of 20%. So if you look at that headline revenue number, it grows at about 18%. But between delivery and the mobility side of the business, revenues are growing north of 20%. Obviously, you have this very nice sort of operating leverage that comes with the business. And yeah, that's kind of just

the business term, 70 countries, 9 million drivers, 200 million monthly active users. And yeah, that's about it. I'm not sure exactly how precise they narrow down the geographic diversification or what commentary you've heard on that. But take us through that. I know everyone's going to have the relationship to Uber in their own country, but it's different in different areas. So what is the geographic diversification from maybe just a ride overall standpoint versus dollar flows? Are we North American focused,

Europe focused, or is it more widely dispersed than maybe some of our American listeners or North American listeners understand it? So just looking at fiscal AI here, almost exactly half the revenues of the company do come from North America, so US and Canada. And then it's kind of

about $15 billion in Europe, Middle East and Africa. So that represents roughly 30% of revenues. So 50% of revenues, North America, 30% Europe, and then you're seeing sort of expansion in LATAM and Asia as well. What do you think the opportunity is? I mean, look, 50% of revenue is coming from either the United States or North America,

but either way, that's a small percentage of the global population. Is part of the thesis that in these other countries, there is much, much longer runway wait to grow, especially if they can just ride the tailwind of economic expansion in some of these other markets such as India, Latin America, what have you. Yeah, absolutely. So I would say it's a bit of a misconception. I feel like at least in North America, we kind of view Uber as this like super mature business. You might know a lot of people that use Uber and whatnot. I would still argue that we are still very much in the early innings of this company and its growth trajectory. There's a chart that they disclose on some of their different earnings

materials. And it kind of shows by country. It's a bit of a weird metric, but it's like what percentage of adults use Uber once a month. And so like their best market by far is actually Australia, Australia, and then it's like Canada after that. And then actually, the US is not one of the best markets. It's like a little bit further down the list. But basically, the way the math works, it's like one in 10 adults or one in five adults uses Uber every single month. And so that leaves, you know, a huge amount of white space in terms of just even in their quote unquote mature markets, such as in Australia, Canada, US, to kind of drive incremental growth and incremental audience gains on that front. And then you also have the sort of natural tailwind of,

you know, increased frequency. So even if in theory, 100% of adults in say a Canada or in Australia are using Uber, which is not the case today. But even if we say it gets to like an amazon level where like i believe 70 80 percent of u.s households have an amazon prime subscription right so even if we get to that like maturity state um with uber in particular you could still drive frequency so it's like i'm sure you know even if 80 percent of u.s households are using uber every single month maybe they can use uber twice per month or something like that right and try to drive that frequency up the average uber user today uh transacts six times per month now the median is much lower. The median is two times per month, but still that leaves massive amount

of white space, even in the mature markets, nevermind expansion into the European countries and whatnot. There's still massive GDP countries. I know Germany in particular, that stat that I outlined of one in 10 adults using it per month in Germany, it's one in a hundred. So they have 1% sort of share of, of you know, people using Uber in that region in specific. And they're making a push to kind of expand their footprint within Germany specifically as of the past year or so, right? So still lots of different countries. And even in their mature countries, there's a lot of white space to continue their growth. Yeah. I think the global scale of Uber is something that often gets underappreciated by investors in general, especially in the context

of the self-driving and Waymo risk. And a lot of people, that seems to be one of the biggest hold ups the we were just showing the chart i mean emea so europe middle east africa accounts for i think 33 of revenue and growing basically non-us and canada markets currently account for half the business and that is growing much quicker than the developed market so So I just think people maybe tend to overstate how much of Uber's rides are competing with self-driving. But with that said, that is pretty much the biggest thesis breaker for a lot of people is where they stand on the self-driving debate. So let's jump into that. I guess there's a lot of ways to go with this.

what do you think what do you make of the self-driving threat slash opportunity is this are they beneficiary can they get hurt by it give us your takes yeah so i'll tell you what i personally have gathered um and then we'll kind of dive a little bit deeper into it in my personal opinion which of course is biased because i'm a pretty big shareholder and whatnot but i believe that this is going to be a secular tailwind for the business and uber will stand to benefit from the advent of autonomous vehicles. Now, embedded in that, of course, you have people that on a surface level thinking,

of course, that makes the most amount of sense of, right, so Tesla or Waymo or whatever, they're going to get rid of the driver. And, you know, surely it's not as big right now, but over time, it's going to be a bigger sort of business for Waymo and whatnot. They're going to expand to all these different cities. And why would they even pay Uber a 20% take rate?

And it's just an innovator's dilemma that Uber, who does not have self-driving technology, you can offer a cheaper ride and just take that market share effectively instantly. Now, unfortunately, and this is something I repeatedly talk about on my YouTube channel, and it's something I promote. Like I always say, if there's one thing you're going to take out of my YouTube videos, it's this thing, which is a first principle line of thinking. It's very easy and frankly, lazy to say, oh, you know what? Waymo is going to come along. They're going to invent autonomous vehicle rides and just immediately take market share and Uber goes to zero.

very easy sort of thing to follow, but you got to kind of look at it on a deeper level and think from a first principles line of thinking how this would kind of play out. And so what you kind of have with that is Uber is a business today that operates in 70 countries with 200 million monthly active users. They have 9 million drivers. It's a sort of network effect that has a global footprint. They're doing 11 billion rides and you don't just spin that up. You don't vibe code that you don't just spin that up in a weekend. Right. And there's a lot of different barriers to entry that uber has kind of developed and and worked through over the past 15 years to get to that point the main thing and i have five or six different reasons why i believe autonomous

vehicles won't quote unquote disrupt uber but the main thing that nobody has answered yet um trust me i've talked to a lot of people that hold the opposite uh opinion on this uh on this matter is um the sort of supply demand issue and we talked about this on the last podcast as well where basically there is variability in terms of the demand of of ubers and they have this chart in their earnings material as well. It's the Q4 2024, right? If you want to pull it up. And so they kind of showcase that, like, for example, if we take the city of Toronto, on average throughout a week, there's a thousand rides being requested per hour, right? But what you have with that is during rush hour. So when people are going to work, say between the hours

of eight to 9am, there's a increase in demand. There's a surge in demand. So there's roughly 2000 rides being requested. And then if you look at, you know, a little bit after midnight, it's it's significantly less there's only say i don't know 100 or 200 rides being requested yeah right there so as you see there's sort of these like peaks in terms of demand and then there's a trough in terms of demand of course going with the hours of the day and then obviously you see on for example a friday night there's an increase in demand um because people are going out and whatnot and uh it kind of fluctuates above and below the baseline right so um what you have with that is if you have a fixed supply of autonomous vehicles, say, I don't know, 500 vehicles or

something, at any given point, you're either under-monetized or over-monetized in terms of how many cars could kind of carry out those rides, right? And the argument that Uber makes is that if you come onto the network, then we can kind of have a hybrid model of bring on humans as there's surges in demand and kind of take those humans off of the network when there's a trough in demand. And then as a result of that, if you're a Waymo, if you're a Tesla, if you're whoever, it doesn't matter. There's like 10, 20 of these AV companies, right? If you're any of these AV companies, we will maximize revenue per car. That's the bottom line. And it's the truth that if you have a hybrid network, Uber will be able to maximize revenue per car for you, the autonomous

vehicle company. And for any of the listeners that aren't looking at the charts there, it's pretty, it's very similar to one of those sinusoidal charts you'll see from an electricity consumption, you know, utility where they have the base load, the baseline of what you have for your lowest. And then throughout the day, you're going to have, if it's a warmer area, more AC usage during the middle of the day, or at night, you're going to have heat on in a colder area where there's different uses for electricity. That's similar for this, where you may have your base load in a certain geographical area, 100 Uber drivers, but then at a certain time of night, you're going to have the need for 300. And I think what you're trying to say, Ari, is maybe

connect it back to the customer standpoint, is if you only had that fixed amount of Waymos or what have you out there, you would have a lot of upset customers at midnight or 10pm on a Friday night. and uber that's very very hard unless you're in uber's position to solve now i guess i'm leading into uh i'm stealing one of ryan's questions here but what other advantages does uber have maybe keep going down you said you had five or six questions or um points there yeah what what what else helps them in the autonomous threat yeah so defensibility against quote-unquote the autonomous thread, which again, I don't personally believe in. But for example, just the technology being solved is another issue. So at the moment, Waymo is technically the only one that has

seriously solved level four autonomous driving. Tesla has not solved it, although they claim there's no driver in the car. Maybe there's somebody remote controlling it back at Tesla headquarters, whatever the case is. Anyways, it's been slow, right? It's been slow. I'm sure over the next five, seven, maybe 10 years, this does end up getting solved. Although there's an argument of the last 10% is, or the last 1% is really difficult to solve, whatever the case is. Anyways, that's a bit of an issue. But even when the technology gets solved with Waymo's today, it's only across the sunshine belt. So, I mean, it only works in like perfect weather situations. I personally live in Toronto and I could tell you the roads here in the winter are absolutely

brutal. I guarantee you that there's not going to be a autonomous vehicle anytime soon that is able to drive in really bad weather conditions, call it two, three months out of the year. And And so that kind of creates another barrier to entry in terms of autonomous vehicles kind of going global and whatnot. Additionally, you know, if you expand internationally, like I'm sure I believe you frequently visit South America and you could probably attest to this. The roads there are drastically different in terms of the quality of the driving and the roads themselves, you know, being patchy or not having work done, whatever the case is. Right. So there's that element to it as well, where like this is not a sort of, you know, you solve it in the United States with like perfect conditions and it immediately kind of translate internationally. There's also the fleet management costs. Right. There's another point of who's going to pay for the cleaning of these cars and the charging of them and, you know, all these different things.

Even in the event of, for example, Tesla, who is saying that like, you know, their customers who own the cars are going to be doing this again. Like, I raised some questions in terms of, like, how many people are going to, you know, have no personal belongings in their car and just kind of send it off, right? Like, there's a lot of questions to be had with that sort of stuff. There's miscellaneous stuff. So it's like, you know, lost items. How do you go about doing that, right? Like, these are all tiny little things that Uber has solved over 15 years that I just, I don't think you just spin this up in the span of a year or something like that. And not to mention, you know, if Waymo or something does try to go independent, you, of course, have autonomous vehicle partners that do not have the distribution of, say, a Google, right?

Like there's Nuro and Avride and WeRide and all these different companies that are currently working on solving it. So if the customer today has the Uber app and they can get an autonomous vehicle on the Uber app, what is their incentive to download a whole different app, put their credit card in? You know, they have saved addresses inside of the Uber app, all that type of stuff. I know me personally, for example, if I go on the Uber app at 9am, it's immediately saying, oh, would you like to go to the train station? It's like the top result, right? They have all this sort of data on you, the Uber customer over, you know, however long you've been using. So there are mild switching costs. The point is, not any of these things alone is enough to kind of, you know, defend against the AV thread. I think it's all of the tiny little things that add up that kind of create a barrier. I think something you raised in your first point there. Yeah. So it's everyone. I think every single one of these, I guess, counter arguments in isolation, you could say, well, Waymo's got a bazillion engineers, whatever. They can spin something up like this. They can compete. But like you said, altogether, at the moment, it seems like Uber provides a better service. but the one that always kind of sticks with me and i think this is basically your first point or touches on it as well if you are one of these self-driving companies the cost to build a car are expensive at the moment maybe it'll come down but they're expensive even the richest companies

in the world you want full utilization you want the car to be working as much as it can to recoup your investment if you don't use uber now maybe there's certain cities like san francisco where it's like super tech savvy and everyone's ready to get on waymo but if you don't use uber it's harder to meet full utilization and i think waymo has seen that that's why they've partnered with uber in so many markets austin i live in austin you can't get a waymo unless you go through uber it is the easiest way to get return on your cars and if waymo is already doing it which is nearly the most one of the richest companies in the world i think that other companies are even more likely to want full utilization so i i agree it seems like this is something where

the partnership gives even though you don't have full control of your ecosystem if you partner with uber it gives you much better economics probably it's not really a loss leader and so anyway i guess i'll let you keep going on if you have any more add-ons to why it makes sense to partner with uber in these these markets but i also want i want you to use the counter argument here what would the disadvantages be why would what is sort of give yourself the uh the bear thesis, why would someone avoid Uber? Yeah. So the bear thesis is you don't own the customer relationship, right? So they are interacting with the Uber app. The customer in their head is getting an Uber. It just so happens that an autonomous vehicle shows up. Maybe you have

some sort of branding of, oh, this is a neuro autonomous vehicle. This is a Waymo, right? Whatever the case is, that is sort of the disadvantage of partnering up with an Uber in the place of, for example, a Waymo. I would imagine that becomes a pretty important thing to try to own it and stuff like that, own the distribution on their own app and whatnot. And, you know, it kind of puts you at a disadvantage because Uber could one day wake up and say, you know what, we've been taking 20% take rate from you guys. We're moving it up to 25%. What are you going to do? You've built a whole business. You're super reliant on us being on here. What are you going to do? Go Lyft on Lyft over there? And, you know, Lyft is just an inferior

service altogether because it takes longer for the rides to arrive. There's less customers, just classic network effects, right? Like the biggest network effect is generally the better service. But I would say for most of these AV companies, the downsides, excuse me, the upsides, or sorry, the advantages outweigh the disadvantages for listing on an Uber, right? So if you, for example, we've kind of seen this play with the OTAs and the travel market, right? Like why do all these different companies, and we'll take the Expedia case, but like why does a Marriott, have their own website, have all their own assets, but then also list on an Expedia. They're taking, I think, 15% less take rate, give or take. Why would they do that? Well,

they're trying to maximize revenue per hotel or whatever the case is. You would way rather have a hotel room with 15% less gross margin generate some sort of revenues than just have it generate no revenues at all. That's just plain mathematics. It's a good analogy. I like that analogy. That's something Dara, the CEO, he actually used to be the CEO of Expedia. That's an analogy that he's kind of given out. One quick follow-up on the different city strategy, where it seems like both Uber and Waymo, as the largest player, are testing different strategies in different cities in the U.S.

Is there any data specifically that Uber has provided that when Waymo specifically partners with them, Waymo sees better outcomes? Have they talked about that at all? So in the most recent conference called the Q3 2025, something interesting, and they said this is only the early innings of it, you know, blah, blah, blah, like there's too little data to kind of draw a conclusion from this. But they did talk about how when they introduced AVs into Austin and Atlanta specifically, total driver's earnings, so including non-autonomous vehicles, total driver's earnings accelerated in terms of like earnings per hour or whatever. So the drivers were earning more. And what that tells you is when AVs get introduced into a market, the total pie grows and accelerates in terms of growth. Again, very early data. This is just two cities that they've done this in the span of, I don't know, like literally a quarter. So things can fluctuate, right? But this has kind of been the thesis all along.

And you kind of saw a kind of similar thing with Chad GPT versus Google and like the argument of like, okay, total pie of searches, people are just going to search more, right? So like, even in the event that Chad GPT takes a big market share of searches, shouldn't matter too much because total searches grow at an accelerated pace. You're seeing something similar, or at least it kind of sounds similar to me in terms of Uber and AVs is when AVs get introduced, the total pie grows. okay i have one final question on autonomous vehicles and then after listeners don't worry we're not just going to talk in circles about this forever we have deliveries moonshots

uh growing the overall tailwind user penetration and valuing the stock so to tease that we'll be talking about that later but i want to steal man what a lot of the ultra bulls in the tech community might say your investors might say around autonomous vehicles where just imagine world where whatever technological leaps they make, Waymo becomes the by far market share leader in autonomous vehicles, and they have, let's say, 90% revenue overlap. Okay, how am I trying to say this? They can cover 90% of Uber's existing revenue geographies, where it might not be the total geographies but if it's centered on urban areas they can overlap with that what would in that situation if Waymo said and again they're owned by Alphabet so they could do this if they

wanted to if they said we're eliminating our relationship with Uber everyone can use Google Maps to pay for Waymo's they try to really eliminate that relationship and go to war with the company what would Uber's advantages be how could they defend themselves in that situation Yeah. I mean, I think it just goes back to the base supply demand issue, right? Like if you are going to be independent of Uber, you will be under monetized or you will be over monetized at any given hour throughout the week. That is just plain fact. And if you list on Uber, the bottom line is this, you will maximize utilization. You will maximize revenue per car. And if you go independent of Uber, you would actually have to be subscale. So like if there's a thousand rides

being requested per hour your peak as a waymo as independent you have to be like you know at the trough there you have to be at like 300 cars per city whatever the case is right so like uh it's um the long story short like if you want to kind of you know uh have significant market share in this game and then try to maximize that revenue per car you have to uh go through an uber um your question was it covers 90 of the cities basically okay it's hard to describe this audibly but uh let's say Waymo, they can cover 90%, and this would be globally too, 90% of the geography where Uber makes money. And then they say, we don't need Uber anymore. We're going straight to Google Maps or what have you, or a separate app. And saying, look, you can buy your Waymos through

this. We cover 90% of the area. Besides maybe, and again, that is a very, very good defense there that you have that oscillating demand. Besides that, is there any way they can defend themselves from an alphabet going full scorched earth and trying to steal and go their own route vertically integrated. All right, folks, before we move on, let's talk about our home for investment research, Fiscal AI. Fiscal AI is a complete stock research platform for fundamental investors. We use it every single day here at Chit Chat Stocks.

It has everything you need to research individual companies from 20 years of financial data to company-specific segments and KPIs, earnings call transcripts, Morningstar reports, and insider ownership data, and much, much more. And they just lowered the price of their highest tier by 60%. If you want a complete enterprise-grade financial data terminal, check out Fiscal.ai. If you use our link, fiscal.ai slash chitchat, you will automatically get two weeks of Fiscal Pro for free, no card required. And if you want to upgrade, our link will get you 15% off any paid plan. Again, that's fiscal.ai slash chitchat. The link will be in the show notes. Yeah, I mean, there's also like, you know, even if we say, okay, Waymo, for whatever

reason, wants to operate independently, you know, Alphabet has infinite money, they're going to, you know, lose money on this for the next decade, no problem, right? Although I do argue that they have bigger battles to win with, you know, cloud and stuff like that, and dumping billions and billions of CapEx into that. Anyways, let's just say they dump a whole bunch of money at this and they try to kill Uber, right? For whatever reason. Again, like Uber will have other autonomous vehicle companies.

Like Waymo is not the only AV company in the world. There's Reride. There's Pony AI, which is Chinese-based. There's Nuro, which they're partnered with. The Lucid Nuro deal, you guys might have heard of them about six months back? Maybe, but not yet. It's like Lucid Cars with Nuro software. Anyways, it's another partner.

They're going to start having autonomous vehicle rides in the States, I believe, starting this year. So there's a lot of different companies. NVIDIA is actually making self-driving software. So if I believe like Hondas and Mercedes cars and stuff like that, like the lane, staying in the same lane and stuff like that, the auto parking, like that's, that's, I believe, NVIDIA software that is in those cars, like literally today. And so you got to imagine that kind of serves as like another sort of partner for them and whatnot. So the point is, even if Waymo is independent and they become a credible competitor, you would have all these different options that can list on the Uber app. And for those companies that don't have a Google-style distribution, they would be another option, and Uber can compete that way. that's a good point is like if you're waymo and you decide yeah screw you but we're going to go for it ourselves you are potentially opening the door for uh another av competitor to have

better brand awareness better uh more trips more data better utilization potentially sacrificing your competitive positioning in lieu of trying to get rid of your take rate, I guess, that Uber's taking. I think that's pretty much all the questions around AVs. I guess one thing I would ask, I'm curious on this, the last one, last time I'll say this. would let's say tomorrow uber announced they're doing self-driving themselves would you like that or not um so they they will not be doing self-driving they spun out aurora which used to be their self-driving sort of company that i believe that was 2020 during the pandemic they spun it out um what is a sort of a question mark which we will see a little bit

more is will uber lean in with their balance sheet so will they start owning these fleets That's the big question that we got to ask. And how does that change the business model fundamentally? So because it's traditionally been a very, very capital light business and obviously owning the fleets of cars, this is going to be capital intensive. Now, my argument back is Uber has always invested massively upfront at a huge loss, whether they've launched roughly 10 to 15 products, including the core delivery, the mobility, grocery, retail, Uber One, this and that, whatever. They have roughly 10 different products that they've launched throughout their existence, and they've always lost negative 50% operating margins when they're trying to kind of gain adoption with this. That sort of investment upfront has changed from being an operating expense to a capital expenditure expense. So it's just changed form in terms of registering a loss upfront to kind of gain adoption. they have uh recently kind of vouched that with the lucid neuro deal in specific i think they're putting up about 350 or 400 million dollars of investment to kind of own part of those cars and

then they did talk about again in the recent uh earnings call that um they do expect these fleets of cars once the business model is kind of proven um that they become financialized so a private equity or uh you know kind of like how we have reits for like hotels and hospitals and stuff like that there will be dedicated reits to own fleets of cars because it's a very predictable say 5%, 6% yield. And so there'll be investors that are willing to pay for that, that they can eventually kind of offload the fleets of cars over time. Securitization of everything. That's how civilization is built. Let's pivot to delivery. First, is Uber Eats profitable? A lot of people have this perception. It's not. Let's just get the baseline. Is it profitable?

Yes. Yes, it is definitely profitable. It's profitable on an adjusted EBITDA margin. So I'm sure you guys don't love that. Although, to my understanding, their adjusted EBITDA is a bit cleaner than some of the egregious cases out there. The famous lemonade chart, if you guys remember that one. Yes, sir. Yes, sir. But it's segment EBITDA, essentially. So you kind of just knock it up maybe to a slightly lower margin if you're trying to go full bottom line.

Yeah, but both the segments are profitable. I believe the freight business actually isn't profitable. but you know they're starting to kind of they're probably going to see a bit of a tapering off in terms of margin expansion they've kind of communicated that to shareholders because they see a lot of different opportunities for growth so that's the thing to know kind of with that they yeah so they've proven that this business can be profitable now they're trying to expand to other avenues talk about the new avenues into grocery in retail because this seems like similar to how doordash is going about this it's maybe not a risk but it's a huge opportunity

for them to tackle this new market maybe even try to go after the amazon's team moves walmart's of the world what is their strategy there and how do you think they're doing yeah so this might seem stupid uh from a surface level of like oh why would you ever you know uber eats grocery to your house isn't that right like so a lot of people kind of have that uh gut reaction to that they outline it's a 10 trillion dollar tam realistically they're not even going to come close to scratching uh in the trillions of dollars in terms of revenues yeah grocery broadly speaking is a 10 trillion dollar uh industry right okay great um no but what you will likely have is and they kind of talk about this it's like people aren't kind of using them

the way like they use an instacart where it's like you know they're ordering all of their groceries to come to their house they're using it as a more there's like small basket sizes and large basket sizes. They're using it for like, oh, you know what, we ran out of pasta sauce and this and that and whatever. And they order like, you know, four to 10 items, whatever the case is, because it's convenient and whatnot, and they get that delivered to their house. And so that's kind of how they're treating it. And then there's a lot of fun stuff to be had with eats in particular, and by extension grocery, where, you know, if you start to pick up on these behavior patterns of like, oh, people who buy pasta sauce, then they probably want pasta as well. And like, there's a lot of cross sell

opportunities like that. They can directly start generating higher advertising revenues with brands specifically. So again, if you, for example, just search cereal in the Uber Eats app, maybe it could be a Kellogg cereal that they put in front of you. And that's a Kellogg's ad that gets routed through Walmart, whatever the case is. There's a lot of cool advertising opportunities. It's a small business for them at the moment. It's $10 billion of gross bookings, which is 5% of the total Uber business. So it's not big, but it's growing really fast. There's grocery and retail. there's a bit of on the retail side um some interesting stuff in terms of like you know if you need something in the next 30 minutes to an hour in most cases uh you're not going to be

able to get that off amazon amazon is you know same day delivery at best for most geographies so there's arguments to be made that like in terms of speed and convenience uber can kind of eat into the amazon moat a little bit i'm a big amazon shareholder it's actually my biggest position but they can eat into that a little bit if you really need batteries for example you just uber eats it 30 minutes later it's at your door right so stuff like that yeah i think it almost kills the convenience store business or maybe that kills it uh potentially disrupts it and changes that whole market what is in your mind the growth potential for advertising in the eats business now with the rides business there may be some potential it could be advertised in some fashion

but with eats it seems more straightforward feels to me that they have a really really large market opportunity here. How big is the business today and how big do you think it could get in the future? Yeah, for sure. So the advertising has been a huge reason why the company is profitable. I mean, I don't think I need to tell you how profitable advertising is, but it's a $1.5 billion run rate business for them. So that's taking one quarter and multiplying by four. And if we're saying that's 100% margin, which it isn't, but that accounts for, that'd be roughly one third of their operating profits thereabouts. It's growing 60% year on year. And some key advantage that I think Uber and also Amazon has over some of the other advertising

players is it's very high intent advertising. So for example, if we take a meta, right, like they kind of have to guess like, oh, does Aria want to see this t shirt? Would he buy this t shirt based off of what he's liked and his watch time on on the reels when he's scrolling it and this and that, right, they have to kind of guess, which it works well. It's a massive business, of course. But with Uber in specific, and also Amazon, you quite literally search up what you're looking for. If I'm typing in pizza in the Uber Eats app, take a wild guess what I'm looking for, right? Like it's very, very obvious. And so they could put like a Domino's buy one, get one offer right in front of you as you search that. And that's very, very targeted advertising

for Uber. And so that's going to be demanding a higher price and it's going to be a very successful business for them in my personal opinion. I mean, it's growing 60% year on year, kind of speaks for itself yeah it's it's pretty obviously high value ad inventory like whether you are a consumer packaged goods brand and their people are searching for groceries like if someone looks up peanut butter you know smuckers or whatever you can lob an ad at them it's very it's it's very easy ad inventory to sell i would imagine i think instacart's pretty much proof for that. They've done that business very well. And then the same with restaurants. I think that makes sense. And I pulled up that chart of the delivery adjusted EBITDA. It seems like this could

be an exceptionally profitable business. And they've shown that even if we don't take adjusted EBITDA at face value here, it's likely that this is still very profitable. Let's shift gears. Yeah, if I can quickly add, another very cool thing they've done with the Eats business is, obviously, they want sort of, as I mentioned, like they invest upfront at a loss to kind of get more, you know, users and stuff like that get higher frequency of transactions and whatnot. Something so genius that they recently did, I believe in like the last year and a half, and I saw this with my own two eyes, with a local restaurant, they implemented these things called merchant funded offers. So this is like buy one, get one free, buy one, get a dessert half off, whatever the case is, right. So it's these merchant funded offers and their pitch to restaurant owners was, okay, sure. You are technically, if you sell two things for the price of one, you are probably incurring a loss or that's a massive reduction in terms of the margins of what you're selling, but it improves the visibility in your local area. And I a hundred percent have seen this with one of the local restaurants near me is they run for lunch, this buy one, get one offer, which is a steal. And

it's packed. That place is packed now. Every time you go for dinner, it has massively raised the visibility of that restaurant in the local area. And it's kind of like a marketing sort of thing that they can do for these different restaurants, right? So it's kind of a cool little thing they're doing there. Yeah. Yeah. It makes sense. Let's shift gears a little bit to, I guess, maybe this is a chance we could talk about freight as well, but what moonshot projects are they tackling today? And then if you can talk about anything in their investment portfolio as well. Yeah, yeah, for sure. So I would say, you know, everything I've outlined in the past little while, like, that makes me super excited, the core business, everything like that. I love the company, right? But what really gets me excited with the Uber investment is the sheer amount of optionality that this company has. And, you know, we talked about Airbnb as having this company as being this company with huge amounts of optionality. I would personally say Uber might be ahead of Airbnb on that front, right? So they have, they're essentially a demand aggregator, right? And they can aggregate demand on all these different sort of like fragmented markets. Historically, it has been, you know, mobility with taxis, then delivery. Now they're diving into grocery and retail, massively investing into that. But over time, you should see, and they recently announced this, they put 40 ski resorts on the Uber mobility app. So you can book a stay or like, you know, you could buy tickets to go skiing off of the Uber app.

i believe this is in i want to say utah or something like that that they recently did this um and then additionally like you know there's like uber helicopter and stuff like that that like you can uh you know book a helicopter ride to go wherever so it seems like random things that they're kind of working on um another very interesting uh thing that they've started pushing within the app you might have noticed is rental cars rental cars uh other than a couple players i believe turo is one of them right that's you guys used to be ai aic aig shareholder right back in the day i see i see yes yes uh yeah that is part of it as well yeah they are i forgot about that they are doing that uh as well on the ski one i think they're doing it in the state of

washington as well i mean it makes complete sense if you have a couple hours to drive to the ski lift area you can have a specific vehicle to store your skis yeah i mean it's it's interesting yeah you're gonna drive the business no no but it's good to keep people around yeah yeah these these small little things like out of every 10, 20 of these investment areas, one of them turns into an Uber Eats business five, 10 years down the line, right? So I'm not saying ski resorts is going to be like the big business for Uber, not at all. But I'm saying between all these different investment areas, one of them, they strike a home run, right? So I think rental cars has huge potential. It's $100 billion a year industry. I mean, if you just take 5% of that over the next,

call it five years or whatever the case is, right? Like that is a significant, significant business for them that they'll be able to kind of generate revenue from. And it becomes that much more sticky and they own that much more mindshare with the consumer of, oh, if I literally want to book anything fragmented, I could probably just go on the Uber app. There's like a career. So if you want to send a package, you can now do that with Uber. There's Uber Pet, right? There's all these different things. Uber Health is another one, another vertical that they're starting to invest in. So a whole bunch of stuff that they got going on. So just following up there, Uber rentals, You mentioned Turo. Are they sort of an aggregator for rental car services, or is this like, I'm Ryan Henderson, I've got my Toyota, I'm going to list it and someone can go drive it?

Yeah. So as it stands currently, it's like, for example, like Hertz or something like that, that has a fleet of cars. It would be a Hertz car that you're kind of renting from. So they're being a demand aggregator for a Hertz. And I don't know the other names. Enterprise is another one maybe, right? some of these rental car companies a bunch of them they all go bankrupt frequently um yeah no okay i like that i mean it seems like an industry that is ripe for aggregation so i don't have to go through the enterprise rent-a-car websites anymore um if i can add by the way on the driver side so there's a question mark of like okay if uber doesn't or sorry if avs don't kill uber now you have nine million drivers that are out of a job or you know a significant number of drivers that no longer have that gig economy job they've started uber ai solutions which is essentially like just data labeling for llms and stuff like that um and so that has started to kind of gain

traction as well um that they're working with uh you know these llms to kind of like basically say like oh this is an image of a carrot and data labeling right um or for security camera companies and stuff like that these are services that a uber driver hey you get a notifications do you have two three hours to just do this quick uh you know work or whatever that like you're uh labeling these images and whatnot, and they can hop on, earn 50, 60 bucks, whatever the case is, right? So it's become a platform for work as well. And that's a degree of optionality for the business as well. What about the investment portfolio? Maybe you mentioned it briefly, but what do they own? And is this a big part of the enterprise value? Because I know I kind of

get lazy with it and don't really look and do all the math myself, but take anything, the listeners through anything important there. All right, listeners, I want to take this time to remind you about the Emerging Moats Stock Research Service, a newsletter that will produce a stock research report every four weeks, regular updates on existing stocks in the Emerging Moats universe. We have an upcoming schedule, including a research report on Wix.com. We have Interactive Brokers, American Express, Nintendo, Airbnb, Nelnet, and much more. Please, if you want, reach out and get a complimentary free trial. You can do that by contacting me through the link in the show notes and giving me a DM on Substack. I hope you'll try out the service.

Yeah. This might've changed since the last time I've looked at the numbers, because obviously these are companies and they fluctuate in terms of price. They have roughly $9 billion of investment spread across a whole bunch of different countries and geographies, right? So essentially in markets where they realize we are spending way too much money to kind of gain traction were maybe second place or third place. They kind of exited that market and took a stake in the leader. So China famously, they've done this. In Southeast Asia, they used to own, I believe, close to a 20% stake in Grab. But over time, I think they've either been diluted or kind of sold that down. And then additionally, in some markets, they've just

outright bought the number one or the number two leader and kind of put their financial backing with that. I believe Turkey is a recent example of this. Trinidalgo or something like that is the name of it um and they they uh just bought it outright uh kareem for uh middle eastern listeners uh is is a is a big one they're actually more than just they're kind of like a super app it's more than just delivery and eats and whatnot you can even um book people to like come and do your laundry or like book people to come fix your furniture and whatnot um so they own i believe it's an 80 stake that they bought in 2020 uh kareem in in the middle east like uae and and saudi arabia and stuff like that it kind of operates in that region um and so yeah they've

They've kind of invested in a variety of different companies, and they also own a stake in Aurora, which is the autonomous vehicle company. Yeah, across the board, it's either competitors that are in geographies they don't operate in, or it's AV companies. Yeah, I'm looking now at the shareholder list here on Fiscal AI for Grab Holdings. They are the largest shareholder of Grab, own more than Anthony Tan, the CEO himself. i guess softbank combined may have slightly more but yeah it's like more than a three billion dollar stake uh in grab let's talk uh take rate so actually maybe i'll save that for a second let's maybe we can go uh market penetration so right now i believe uber touts like a 15 percent user penetration in the united states a how what do you think this can get to over time

and then b why would they be able to grow this what would be sort of the tailwinds helping them um yes on the mobility side i don't know honestly sky's the limit on that front um especially you know if we go to an autonomous vehicle future the the cars start costing less the sort of urbanization of cities, right? Like all these different things that has a lot of room to grow, in my personal opinion. On the Eats side, what I will say is the CFO has actually directly kind of given us numbers on this. At the moment, it also holds roughly a 15% market penetration. And they kind of look to Amazon, which has a 25% penetration of commerce, right? And they talk about how with their Eats business, in their humble opinion, they think it can even be higher

than that. It could get to 35% in the distant future. So in terms of penetration of the taxi market or mobility market, whatever you want to call it, I would say we could probably be closing in on 30%, 40%, maybe 50% thereabouts over time. It's kind of funny how, this is just a pointless side note, but it's funny how when they estimate their TAM, they always say, it's a massive TAM. If we can get to just 1% share, we'll have a massive business. And then they're like, But we have 15% market share also. So it's like, where do you draw the line? Is it your tab or which tab is it?

Yeah, exactly. Like they say, I hate when companies do that, but I don't know. I guess you got to do it for the headlines, right? It's like, oh, there's a trillion dollar opportunity in autonomous vehicles. Yeah, I mean, like across the entire world and maybe with all the different competitors. Yeah, maybe it might get to trillion dollars of revenues. But you guys are not even going to come close to scratching that. the worst one was circle that said all of the total currencies in circulation so 100 trillion

that was my that was my all-time favorite that's your market opportunity sure sure sure um yeah that all makes sense what about i guess maybe before we hit valuation let's talk take rate this is a question from twitter slash x thank you for everyone that participates in that if you want to ask questions for any podcast guests or any episodes that we do make sure to do that we'll usually put out a tweet on twitter or within the substack chat both are free for you to access can they expand the take rate do you expect them to or what's kind of the game plan there what they've said versus maybe what you expect so a little bit of fun history with the ceo uh dara khosrowshahi is his last name brett i know you had a bit of difficulty pronouncing that before but

Yes, I did. That's a hard one. Yeah, yeah. Persian last name, you know. But no, he was the former CEO of Expedia for 13 years. And I wouldn't say he's directly the reason why. But Expedia made some strategic mistakes in terms of having way too high of a take rate and kind of losing market share within Europe specifically. And he's directly said, fat pigs get slaughtered, right? That's a saying. And so he wants to kind of use the take rate as a sort of last measure in terms of improving profits or whatnot. They have raised the take rate in the past, like just in the sequence of, I don't know, roughly four to six quarters or so. They went from roughly a 20% take rate to a 30% take rate. And it's actually came down a little bit, about 27% as it stands today.

And so that's kind of where they want to keep it. They don't want to increase that take rate a lot more. It kind of puts pressure on the network and the drivers and it starts to kind of break things, right? And at the same time, if you do raise the take rate way too much to drive incremental growth, then it kind of opens the door for a lower take rate competitor to come along and take market share and take your drivers. So they've kind of outlined that they don't want to increase that. And I believe it's the right decision to be making. I think you can just grow through increased audience coming onto the platform, increased frequency, so on and so forth.

There's other ways to grow. All right, let's talk valuation. Where do we stand today? and how are you valuing it? What metric do you use? Obviously, we talked before we hit record about some of the nuances in needing to value this business because there's some one-time stuff that's a little awkward.

So talk us through that. Yeah, so my favorite ratio to use is the price to innovation ratio from Kathy Witt. I'm messing around. But no, in terms of actually valuing this business, it's quite difficult. There's a lot of different stuff going on.

Margins are still increasing. So for example, generally, the ratio I like to use is EBIT to EBIT. But in my opinion, that doesn't work too well at the moment because they're starting to still increase those operating margins. So it's not a true reflection of the profitability at the business. You can't use PE. There's like a tax thing going on over the past 12 months. So I think when we lap that quarter, it'll be better.

And then at the same time, you can't really use free cash flows either because there's insurance reserves and stock-based compensation. You got to factor in it and it gets messy. I think at the moment, the best ratio to use right now is probably either the forward PE or use the trailing price to EBT, which is earnings before taxes. And so if you look, for example, on either of those two ratios, at the moment, it roughly trades at about 30 times earnings, roughly, right? If you kind of work through all the messy math, that's kind of where you land at. And then you have a business that grows revenues roughly about 20%, a little bit margin expansion. You're looking at EPS growth in the low 20s percent, maybe a little bit faster with some buybacks, right?

So you're paying 30 times earnings for roughly 20% to 25% EPS growth over the next handful of years. All right. I guess nothing to add there. Feels like a reasonable price if things keep progressing like this. well let's flip things around invert the situation what would cause you to sell what are you looking for maybe one or multiple things to cause you to sell and what would data would you need to see to add to your position yeah so um in terms of av stuff like i

really can't imagine that would be one of the reasons i sell or like that takes significant market share and whatnot. I would say it's more like strategically, if they have any sort of strategic mishaps and whatnot, maybe they don't expand into certain geographies, whatever, or they start lighting cash on fire, whatever the case is. If I see some sort of red flags in terms of investment areas, or they don't push the gas in terms of Uber One or advertising and whatnot, stuff like that could kind of serve as a red flag. The main, like my own personal investment criteria, I generally try to hold these businesses, um, you know, ideally like forever, but of course that's a bit of an unrealistic expectation. I would probably be selling, um, based off valuation.

If I were to sell this business at some point in the future, if it's trading at, you know, 50, 60, uh, like 50 or 60 times earnings, that's probably, um, where I would kind of look at maybe trimming or reallocating to better opportunities. Um, but in terms of the business, uh, I really don't think anything would uh a bit naive of me but i don't think they're going to do anything that would warrant me to sell is kind of what i'm trying to say that is uh yeah it's always a good reason to have to sell is when the multiple has just expanded too far that's definitely a good problem to have let me pose the question to you this way if over the next five years your uber investment is flat it's gone nowhere hasn't worked out that i would well i guess it depends what the

opportunity cost is but i would say flat over the next five years is not working out why do you think that would be why would that be the case whoa um no that's uh that that's i've never really put much thought into that um one thing to add though uh in terms of another reason i would tell is if growth went below 10 which again i don't think happens just through audience growth and and uh frequency growth and stuff like that, for the stock to be flat over the next five years, you would have to see a 80%, 90% market share company come along in AVs, whether that's a Tesla, a Waymo, whatever, and eradicate the Uber business. That's what would have to happen. And even at that point, it's something like 25% of gross bookings come from the United States,

which on a revenue basis is more, but still, it's not like the business goes to zero or it's bankrupt. So yeah, in that case, I would say the stock could be flat five years from now is if a Tesla comes along and has 90% market share in autonomous vehicles and rapidly gains adoption and kind of disrupts Uber on that front. That's what would probably have to happen. Okay, the last question for me, unless Ryan has one to add here. What is one thing you think investors are missing about Uber's business today? What do you think is misunderstood widely when you see people comment on Twitter, investment blogs, what have you, about this business?

A hundred percent, I would have to say it's the sort of disconnect in terms of like how hard it is to replicate Uber's business. It's like people, well, to be honest with you, people refer to ServiceNow as having like zero mode and it's like just some garbage software. So I don't have high expectations with Twitter users, but yeah, there's a huge disconnect with people that have, you know, maybe never worked with tech or never really put much thought into it or maybe newer investors and whatnot. And they sort of have this idea of like, yeah, you know, Google is just going to make an app and that's it. You know what? Uber is done for. Uber is just an app, right? Or like they don't necessarily kind of think about all these different mechanisms

behind the business in terms of the algorithms routing the, you know, the supply and demand. And there's like a real network effect out there, all the different miscellaneous thing, the fleet management costs like there's so many different things that goes on behind the scenes that you just as a consumer you don't think about and um there's just a massive disconnect in terms of like how easy it is to replicate the uber business if it was so easy we'd have 100 competitors like uh there's a reason there isn't right it's just lyft and uber that's true supply is hard to replicate that's a good point all right ryan anything else before we close things out that's all for me uh i think that was very helpful aria uh let me let me pose this to you dara steps down

oh would that be a deal breaker for you uh i'd have to see who's his replacement definitely but he is i would allocate a huge percentage of why i'm so confident in the business it by the way listeners if you get the chance please listen to a couple dara interviews he is like i just walk away every time thinking like oh that guy gets it he just he just understands the business he knows exactly what to do. There's so much confidence and humility in the way he speaks. Yeah, that would definitely be a bit of an issue for me in terms of if he were to step down and his replacement isn't as good as a CEO, they'll definitely kind of knock it down in terms of confidence. Question for you, though. Are you guys interested in opening a position? Because

we've kind of been dancing around this for a couple months. I am. I think I get a little bit greedy on these high quality businesses and I want them at like 20 to 25 times earning, something like that but i've been on the like back and forth on the self-driving threat and thinking through it more listening to people like you it feels like they have a much more defensive position than you would assume at first glance so yeah i guess i just get a little bit greedy on valuation on the entry multiple 20 25 times is maybe more where i'd be interested but i'd like a little drawdown here and then then i'd get back in and then i'd maybe i mean you gotta consider it you gotta factor in growth here right hey exactly that's what i'm saying i'm greedy

i think it's gonna work from here i just i'm i'm a little greedy on entry entry price it is uh actually yeah this gave me uh your comments around the av situation gave me a better sense of security as to whether or not that's like really going to disrupt the business i i think i would certainly err on the side of no it feels like aggregating the supply is still very valuable even to those av companies the brett and i actually have a running bet as to which company will be more valuable between airbnb and uber over the next call it i think what was it initially it was like we made this bet three years ago brett but now it's uh i think are we renewing it it's Perpetual?

Perpetual. My guess is they'll both do well, honestly. No, I like the Airbnb business, but I'll definitely take Uber in that bet if I can pick a side here. Yeah, if there's one thing that has hurt Airbnb versus Uber, Uber's been much, much better

at expanding into new markets. Airbnb has kind of been stuck in their core business. That was a topic for a whole other podcast. Aria, let's wrap things up. Thank you for taking the time to join us today. tell the listeners want to hear more from you where they can find you yeah absolutely um it's it's just my name so aria radnia i believe i'll be linked in the description or the show notes wherever you guys are listening and um yeah i talk you know kind of like this sort of style

uh very much emphasis on qualitative research i'm not going to just read you the stock price and the pe ratio very much focused on moats and analyzing fundamentals and the businesses uh reasonable projections into the future growth of the business so just my name aria radnia you find me on twitter or youtube and uh yeah the links yeah the links to that will be the links that to that will be in the show notes thanks again for coming on as a disclosure we are not financial advisors anything we say on this show is not formal advice or recommendation ryan i or any podcast guests may hold securities discussed on this podcast may have held them in the past and may buy sell or hold them in the future thank you everyone for tuning

into this episode we'll see you next time goodbye everyone We'll be right back.