What a brutal six months it’s been for Uber. The stock has dropped 28.3% and now trades at $71.74, rattling many shareholders. This might have investors contemplating their next move.
Following the pullback, is this a buying opportunity for UBER? Find out in our full research report, it’s free.
Why Does Uber Spark Debate?
Notoriously funded with $7.7 billion from the Softbank Vision Fund, Uber (NYSE: UBER) operates a platform of on-demand services such as ride-hailing, food delivery, and freight.
Two Things to Like:
1. Monthly Active Platform Consumers Skyrocket, Fueling Growth Opportunities
As a gig economy marketplace, Uber generates revenue growth by expanding the number of services on its platform (e.g. rides, deliveries, freelance jobs) and raising the commission fee from each service provided.
Over the last two years, Uber’s monthly active platform consumers, a key performance metric for the company, increased by 15.1% annually to 202 million in the latest quarter. This growth rate is among the fastest of any consumer internet business and indicates its offerings have significant traction. 
2. Increasing Free Cash Flow Margin Juices Financials
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
As you can see below, Uber’s margin expanded by 17.5 percentage points over the last few years. This is encouraging, and we can see it became a less capital-intensive business because its free cash flow profitability rose more than its operating profitability. Uber’s free cash flow margin for the trailing 12 months was 18.8%.
One Reason to be Careful:
Growth in Customer Spending Lags Peers
Average revenue per user (ARPU) is a critical metric to track because it measures how much the company earns in transaction fees from each user. This number also informs us about Uber’s take rate, which represents its pricing leverage over the ecosystem, or "cut" from each transaction.
Uber’s ARPU growth has been subpar over the last two years, averaging 2.5%. This isn’t great, but the increase in monthly active platform consumers is more relevant for assessing long-term business potential. We’ll monitor the situation closely; if Uber tries boosting ARPU by taking a more aggressive approach to monetization, it’s unclear whether users can continue growing at the current pace. 
Final Judgment
Uber’s merits more than compensate for its flaws. After the recent drawdown, the stock trades at 14.2× forward EV/EBITDA (or $71.74 per share). Is now a good time to buy? See for yourself in our in-depth research report, it’s free.
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