In the dynamic landscape of technology, the intersection of consistent product demand and swift innovation weaves a promising narrative for potential growth. To that end, let's analyze two prominent tech stocks, Uber Technologies, Inc. (UBER) and Box, Inc. (BOX), to discern which holds the potential for superior returns.
Technology acts as the catalyst for unlocking peak business efficiency. Its relentless need for advancement remains steadfast, backed by ongoing investments from consumers, governments, and corporations. This ensures a consistent path of upward expansion that will persist long into the future.
The industry's upward path is primarily thriving on the widespread adoption of state-of-the-art technologies. Notably, the democratization of Generative AI is expanding globally, thanks to readily available pre-trained models through cloud computing and open-source technology, making it accessible to a broader audience.
Gartner (IT) forecasts that by 2026, over 80% of enterprises will have integrated generative AI APIs, models, or applications into their production processes, a substantial increase from the mere 5% adoption witnessed earlier this year.
Additionally, other technological developments and advances such as the Internet of Things (IoT), 5G networks, blockchain, spatial computing, homomorphic encryption, metaverse, 3D printing, additive manufacturing, and robotics and automation are poised to propel industry growth, expanding its horizons even further.
Looking ahead, the information technology market is expected to grow at a CAGR of 7.9% and reach $12 trillion in 2027, as projected by Report Linker.
In terms of price performance, UBER has declined 6.6% in the past month, while BOX gained 1.6% during the same period. However, over the past six months, UBER witnessed a 38.3% jump, while BOX plunged 8.1% over the same duration.
Moreover, UBER has gained 71.1% over the past year, closing the last trading session at $44.38, whereas BOX has lost 6.2% during the same period, reaching a closing price of $25.40 in the last trading session.
But which Technology - Services stock could be a better pick? Let’s find out.
Recent Developments
On May 23, UBER and Waymo, an autonomous driving technology company, revealed a multi-year partnership to enhance the utilization of the Waymo Driver through the Uber platform. The integration could position UBER to capitalize on the rapid integration of fully autonomous driving into everyday life.
On October 11, BOX and cybersecurity leader CrowdStrike (CRWD) unveiled their partnership to bolster cloud data security and combat breaches for organizations. The collaboration integrates BOX's secure content management with CRWD’s AI-powered Falcon platform for real-time access control and threat prevention.
By teaming up with CRWD, BOX aims to redefine cloud file security, offering native solutions that safeguard data without disrupting workflow and setting a new industry standard. This broader appeal could lead to increased revenue and market share, contributing to BOX’s overall financial strength.
Recent Financial Results
For the second quarter that ended June 30, 2023, UBER’s revenue increased 14.3% year-over-year to $9.23 billion. Its adjusted EBITDA grew 151.6% from the year-ago value to $916 million.
In addition, net income attributable to UBER stood at $394 million, compared to a net loss of 2.60 billion in the prior year’s period, while net income per share attributable to UBER’s common stockholders came in at $0.18, compared to a loss per share of $1.33 in the previous year’s quarter.
For the fiscal 2024 second quarter that ended July 31, 2023, BOX’s revenue increased 6.3% year-over-year to $261.43 million. Its non-GAAP gross profit grew 7.3% from the year-ago value to $201.10 million.
Furthermore, the company’s non-GAAP net income and non-GAAP net income per share attributable to common stockholders rose 30.5% and 28.6% from the prior year’s period to $54.74 million and $0.36, respectively.
Past and Expected Financial Performance
Over the past three years, UBER’s revenue increased at a CAGR of 43.3%. During the same period, the company’s total assets grew at a CAGR of 6.5%.
Analysts expect UBER’s revenue to grow 11.9% year-over-year to $35.68 billion for the fiscal year ending December 2023. In addition, the company’s EPS for the ongoing year is estimated to rise 107.1% from the prior year to $0.33. Also, its EPS is expected to grow 23.2% annually over the next five years.
Over the past three years, BOX’s revenue rose at a CAGR of 11.5%. Over the same duration, the company’s total assets and levered free cash flow increased at CAGRs of 3.6% and 18.6%, respectively.
For the fiscal year ending January 2024, Box’s revenue is expected to increase 5.2% year-over-year to $1.04 billion. The company’s EPS for the current year is expected to come in at $1.49, up 24.2% from the previous year. Furthermore, BOX’s EPS is expected to grow 18.7% per annum over the next five years.
Valuation
In terms of trailing-12-month Price/Sales, BOX is trading at 3.60x, 40.6% higher than UBER, which is trading at 2.56x. However, BOX’s trailing-12-month EV/EBITDA of 41.90x is 86.8% lower than BOX’s 317.40x. Moreover, BOX’s trailing-12-month Price/Cash Flow of 11.51x compares with UBER’s 46.05x.
Profitability
UBER’s trailing-12-month revenue is 34.3 times that of what BOX generates. However, BOX is more profitable, with a trailing-12-month gross profit margin of 75.08%, compared to UBER’s 32.06%. Moreover, BOX has a trailing-12-month EBITDA margin of 9.76% compared to UBER’s 0.83%.
Additionally, BOX’s trailing-12-month net income margin and levered FCF margin are 4.86% and 30.52%, respectively, compared to UBER’s net income margin of negative 1.07% and levered FCF margin of 2.52%.
POWR Ratings
UBER has an overall rating of C, which equates to Neutral in our proprietary POWR Ratings system. Conversely, BOX has an overall rating of A, translating to a Strong Buy. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. UBER has a D grade for Value, in sync with its higher-than-industry valuation. In terms of forward non-GAAP P/E and forward EV/EBITDA, the stock is trading at 34.52x and 24.25x, 97.1% and 123.2% higher than the industry averages of 17.51x and 10.86x, respectively.
On the other hand, BOX has a B grade for Value, justified by its lower-than-industry valuation. In terms of forward non-GAAP P/E and forward EV/EBITDA, it is trading at 17.11x and 13.24x, 21.2% and 4.2% lower than the industry averages of 21.72x and 13.82x, respectively.
In addition, UBER has a B grade for Quality, justified by robust profitability. The stock’s trailing-12-month gross profit margin and asset turnover ratio of 32.06% and 1.08x are 5.6% and 32.5% higher than the respective industry averages of 30.35% and 0.81x.
Whereas BOX has an A grade for Quality, in sync with its comparatively better and higher-than-industry profitability. Its trailing-12-month gross profit margin and asset turnover ratio of 75.08% and 0.96x are 52.9% and 54.9% higher than the respective industry averages of 49.10% and 0.62x.
Of the 73 stocks in the Technology - Services industry, UBER is ranked #33, while BOX is ranked #4.
Beyond what we’ve stated above, we have also rated both stocks for Growth, Momentum, Stability, and Sentiment. Click here to view UBER’s ratings. Get all BOX ratings here.
The Winner
Technology's growing integration promises to reshape countless industries and sectors. Additionally, the industry foresees a connected future driven by cutting-edge advancements such as IoT, 5G, blockchain, spatial computing, the metaverse, 3D printing, additive manufacturing, and robotics, pushing its boundaries ever further.
Given the industry's upward trajectory, tech titans UBER and BOX are strategically poised to harness its expansion. Nevertheless, BOX's discounted valuation, higher profitability and brighter growth prospects position it as the superior investment choice over UBER.
Our research shows that the odds of success increase when one invests in stocks with an overall rating of Strong Buy. View all the top-rated stocks in the Technology - Services industry here.
What To Do Next?
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UBER shares were trading at $43.38 per share on Wednesday afternoon, down $1.00 (-2.25%). Year-to-date, UBER has gained 75.41%, versus a 14.24% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.
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