This is Uber's central challenge as it moves from the cozy confines of the Bay Area, where venture capital and private equity firms fund futuristic projects, to the rigors of Wall Street populated by more risk averse mutual funds and wealth managers focused on financial performance.
among the top holdings in its mutual fund. "When you can buy a business at a similar market cap that's currently producing cash flow with much more certainty of outcome, why not take that instead?"Yacktman sees the value in Uber as a service. He knows it saves time, makes payments easy and provides a much more comfortable ride than your typical cab. Food delivery also makes perfect sense, given there's a huge fleet of cars on the streets.
Uber has a metric called core platform contribution margin, which is the percentage of revenue left after "direct expenses." That number came in at 9% of revenue for 2018, and that's before accounting for all the investments in emerging products. In the first quarter of 2019, the number is turning south, with Uber expecting a negative margin of between 4% and 7% because of competition and spending on Uber Eats, the food delivery business.
"I'd rather buy one of the host of profitable companies showing me the money now and take a wait-and-see approach with Uber to determine if this is a sustainable profitable business model," said Yacktman. Large-cap companies that are losing money today are being punished by the market. CVS shares have plunged 22% in the past year, while GE has lost 31%.Uber has a very different story to tell than those two companies, which are stuck in legacy markets and struggling to find opportunities for growth. Only a decade old, Uber is pioneering a new industry and working towards a future of self-driving cars, all while growing 42% last year to over $11 billion in revenue.
Uber's vision is to build global platform that includes ride-sharing in its current form, a continued expansion of Uber Eats and with a whole lot more.
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