Transportation Infrastructure
Includes Air Freight & Logistics
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UBER $72
GOOG $159 TSLA $227 16 Sep 2024 |
Uber shares spike on driverless ride deal with Waymo
In a sign of what the nation's streets may look like soon, Penn New Frontier Fund member Uber (UBER $72) has inked an exclusive deal with autonomous car company Waymo, a subsidiary of Alphabet (GOOG $159), to provide driverless transport to ride-hailers in Austin and Atlanta. The trips, which will begin in early 2025, can only be booked through the Uber app. Uber shares popped 7% on the announcement. This approach is an interesting one which begs the question, why isn't Waymo going it alone? After all, the company's autonomous vehicles can already be seen on the streets of San Francisco 24/7, with around 50,000 paid rides per week. The answer has to do with Uber's massive infrastructure and dominance within the industry. The company has been rapidly expanding its global reach, with special emphasis on Latin America and Europe. With 150 million customers using the Uber app, its advanced platform sets it apart from the competition. Since replicating the platform would be a herculean task, it makes sense for a hardware/software company like Waymo to "plug into" the Uber app and simply take a cut of the revenue generated. Neither company has offered any glimpse into what the revenue-sharing structure looks like. Another catalyst for the deal was probably the planned Tesla (TSLA $227) robotaxi event slated for mid October. Always the showman, Tesla's Elon Musk has billed the event as the company's most significant moment since the introduction of the Model 3 nearly a decade ago. Analysts are expecting an impressive demonstration of the full self-driving (FSD) capabilities of the vehicle. For its part, Uber sold its own self-driving division to start-up competitor Aurora Innovation for $4 billion in 2020. We still don't believe analysts are fully grasping how FSD technology will reshape the transportation landscape over the coming decades. Despite their respective share prices, we are still buyers of Uber, Alphabet, and Tesla. Not so much the legacy domestic car companies, which continue to fumble the ball in this arena. |
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UBER $79
14 Feb 2024 |
Penn member Uber jumps 15% after announcing first-ever buyback
Shares of Penn New Frontier Fund member Uber (UBER $79) jumped 15% after announcing the company's first-ever share buyback plan. The repurchase plan, which calls for buying back as much as $7 billion worth of stock, comes on the heels of Uber's profitable 2023; a year which saw consistently growing free cash flow. The ride-hailing firm now has a cash hoard of $5.4 billion on its balance sheet. It was a stellar year for the firm, whose shares are now up 137% in the past fifty-two weeks. Not only did it achieve full-year profitability in 2023, it was also added to the S&P 500 in December. And while we call it a ride-hailing service, the company is really a technology-based services firm. Uber's delivery segment grew 6% y/y, to $3.1 billion in Q4, while gross bookings for the unit grew 19%. The company continues to expand its delivery business, buying food delivery service Postmates a few years ago and, more recently, booze delivery service Drizly. The latter has been integrated into Uber Eats, though it also maintains a standalone app. Ironically, not that long after Domino's Pizza (DPZ $421) ran a series of tone-deaf ads slamming third-party delivery companies, the chain teamed up with Uber to allow customers to order pizza through both the Uber Eats and Drizly apps. We are still strong believers that Uber will lead the way with respect to autonomous mobility and delivery options in the near future. Until this next massive growth driver manifests, the industry leader should continue to operate comfortably in the black. One fundamental reason for our continued confidence in Uber is the firm's stellar CEO, Dara Khosrowshani. Before taking the helm at the company in 2017, he cut his teeth at Expedia Group as president and CEO, and has performed masterfully since taking over for embattled founder Travis Kalanick. While Uber has blown threw our initial price target of $70, we still consider it in the "Buy" range. |
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UBER $63
13 Dec 2023 |
Uber soars higher after inclusion into S&P 500 announced
In 2022 we added Uber (UBER $63) to the Penn New Frontier Fund and there has been a litany of good news on the company since. The latest positive tidbit comes from an index; the S&P 500, to be precise. As of Tuesday the 19th of December, the transportation services company will join the prestigious index, along with IT manufacturing firm Jabil (JBL $121) and Builder's FirstSource (BLDR $149), a building material company and another Penn favorite. Uber shares rallied on the news, and are now up 150% year to date. Three companies not faring so well are the ones being knocked out of the index: Sealed Air (SEE $33), Alaska Air Group (ALK $37), and SolarEdge Technologies (SEDG $76). The middle name is interesting, as the airline recently announced its intent to buy competitor Hawaiian Airlines (HA $13) for $1.9 billion—a massive premium to the $231 million market cap it had going into December. As for SolarEdge, the solar power industry is down something like 40% year to date. Uber's inclusion makes perfect sense. The company has the largest market cap ($129 billion) of any US firm not listed in the S&P 500, and its Q3 earnings report showed four consecutive quarters of profitability. As the benchmark player in the ride-sharing space, we see a number of catalysts driving growth over the next several years, to include its growing Uber Eats business. Although our UBER position has nearly doubled in value from last year's purchase price, we would still be a buyer at its current level. |
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UBER $38
08 May 2023 |
Penn member Uber’s most excellent quarter
We have been big believers in transportation infrastructure company Uber (UBER $38) from its early days, even while analysts were throwing the company under the bus. We were undeterred by various government agencies’ attacks, arguments that competitors would eat away at market share, and two sizeable downturns in its share price. The company’s latest earnings report was what we expected: Uber delivered a beat on both revenue and earnings. The company generated revenue of $8.82 billion in the first quarter, a 33% jump from Q1 of the previous year, and gross bookings rose 22%, to $31.4 billion. Adjusted EBITDA rose to $761 million (beating the company’s own guidance of $660M to $700M) and should rise as high as $850 million in the second quarter. Shares spiked 11% on the report. The Mobility segment (ride-hailing) led the first-quarter charge, with gross bookings climbing 43%, while Delivery gross bookings were up 12%. The Freight division, which the company is considering spinning off or selling, was the laggard, with gross bookings down 23%. Uber’s network effect continues to gain momentum at the expense of the competition, chiefly Lyft (LYFT $9), and the company’s total addressable market points to strong growth ahead. Uber currently controls about one-third of the global ride-sharing market, and its food delivery service—currently 40% of revenue—should be a major growth driver going forward. We maintain our $70 target price on Uber, a member of the Penn New Frontier Fund. That would represent an 85% share price increase from here, even after the post-earnings bump. |
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UBER $31
01 Nov 2022 |
Uber shares spike after the company reports beat on sales, strong ridership growth
A few weeks ago, shares of Penn New Frontier Fund member Uber (UBER $31) fell sharply on news that the Biden administration wanted to force gig economy companies to reclassify drivers as employees rather than freelancers. At the time, we believed that drop was a mistake, as there is very little chance the plan would ever see the light of day. That would have been a good time to get into the ridesharing company. Shares spiked over 15% mid-week as the company reported a staggering 72% jump in sales—to $8.34 billion—from the same quarter in 2021. Gross bookings rose 26%, to $29.1 billion, and adjusted EBITDA came in at $516 million—another beat. Uber Eats, the food-delivery unit of the company, now accounts for one-third of Uber’s total revenue mix. In addition to the sales beat, Uber CEO Dara Khosrowshahi said he is quite optimistic about the fourth quarter, adding that even lower-income riders are increasing their ridership despite looming recession fears. He projects $600 million in adjusted earnings over the course of the quarter. As for the worker shortage, Uber’s global driver base is now back to pre-pandemic levels. We have stuck with Uber through the horrendous 2022 downturn because we believe in the company’s growth trajectory. By building out a suite of delivery services, the company has insulated its business (to a good degree) from cyclical economic downturns. Additionally, the industry has a rather wide moat, and Uber is the clear leader in the space. We maintain our $70 price target on the shares. |
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FDX $149
23 Sep 2022 |
FedEx shares just suffered their worst day ever; are they now worth looking at?
When FedEx (FDX $149) shares were trading at $245.63 this past February, we removed the company from the Penn Global Leaders Club to make room for another holding. We had lost a good degree of confidence in the management team, and labor costs were suddenly becoming a major drag on the firm. That move was fortuitous, as FedEx just experienced its worst day as a publicly traded company—losing nearly one-quarter of its market cap—after a disastrous earnings call. After giving a rosy outlook in June, management did a 180-degree turn in September, reducing guidance by 50% and predicting a bruising global recession. Analysts were quick to point out that the major issues were not macro in nature, but directly related to this integrated freight and logistics giant. Q1 earnings per share fell 21% from the year prior, against expectations for an 18% gain; revenues rose 5%, but that number missed estimates as well. The company pulled its 2023 guidance altogether, citing a gloomy and uncertain global outlook. To round out the ugly report, FedEx said it plans to raise shipping rates this coming January by an average of 6.9% across the board. Shares are now down over 42% year to date. With shares trading where they were back in June of 2020, are they now a buy? While the $2.7 billion in cost-cutting measures will help, and customers will probably just accept the shipping rate hikes, we don’t see the shares worth much more than $200 right now; and the risk to get that possible 33% return is still too high in our opinion. |
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UBER $29
02 Aug 2022 |
Uber soars after the company becomes cash-flow positive for the first time
Shares of ride-sharing service Uber (UBER $29) spiked over 17% on Tuesday after reporting revenues of $8.1 billion for the second quarter (versus $3.9B in Q2 of 2021 and $1.9B in Q2 of 2020) and $382 million of free cash flow—the first time that number has been positive. Gross bookings grew by one-third, to $29 billion, from the same quarter last year. While CEO Dara Khosrowshahi said that inflation was not pushing riders away, it was attracting more drivers looking to supplement their income in the face of rising prices. The day following the earnings release, Raymond James helped the shares maintain their rally by upgrading the stock from market perform to outperform, citing momentum in the company’s mobility business. Uber operates in three reportable segments: Mobility, Delivery, and Freight, and boasts of the most widely utilized app in the industry. The company’s technology is available in 72 countries around the world. We own Uber in the Penn New Frontier Fund, maintaining a price target of $70 on the shares. We believe the company will continue to be the industry leader in an business with phenomenal growth potential. As autonomous vehicles become more widely accepted, Uber is also poised to lead in that nascent area. |
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UBER
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Uber jumps on news it is buying booze delivery company Drizly
(03 Feb 2021) Approximately 22% of ride-sharing platform Uber's (UBER $57) revenue emanates from food and drink delivery, with its Uber Eats division lagging well behind the likes of DoorDash, Postmates, and Grubhub. The company is making an aggressive move to change that with its $1.1 billion purchase of Drizly, a services firm which currently offers beer, wine, and hard liquor deliveries in over 1,400 cities. The deal will be funded with a mix of Uber stock (90%) and cash (10%), and is expected to close in the first of of this year. While Uber will maintain a separate Drizly app for customers, it will integrate the Drizly marketplace into its existing Uber Eats app. Uber shares were up 7% on the day of the announcement. This was a smart move, and we continue to see Uber as the dominant player in the industry. That being said, the company lost $7 billion on $12.8 billion in revenues over the trailing twelve months, with the pandemic doing immense harm to its business model. We see UBER shares fairly priced around $60, just $3 above where they currently sit. |
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UBER
LYFT |
Uber threatens to suspend operations in Cali after new ruling
(12 Aug 2020) Is there any wonder companies are leaving the not-so-Golden State in droves? Last year the California legislature passed Assembly Bill 5 (AB5), which would force ride-sharing companies such as Uber (UBER $31) and Lyft (LYFT $31) to stop classifying their drivers as contractors (which is what they are) and begin classifying them as employees of the company (which is what they are not—by design). The bill was on hold pending appeal, but this week San Francisco County Superior Court Judge Ethan Schulman upheld that law and ordered the firms to make the changes. This simply won't happen. For Uber, that would mean suddenly making 100,000 contract workers employees of the company. The typically mild-mannered and restrained CEO, Dara Khosrowshahi, was blunt: the firm may be forced to shut down temporarily in California if enforcement of this law is initiated. Perhaps he said "temporarily" because the gig economy companies affected, which also include food delivery services like DoorDash, are pushing for Proposition 22, a measure on November's ballot which would exempt these companies from the very law which targeted them in the first place. California has designed a nightmarish and byzantine legal system designed to stymie productive companies and benefit the state's litigators. Until that changes, companies will continue to flee. As for Uber and Lyft, the ruling comes right as the companies are trying to pull out of the fiscal nosedive caused by the pandemic. |
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HTZ
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For Hertz, bad decisions came home to roost thanks to the pandemic
(26 May 2020) Before the pandemic, auto rental firm Hertz Global (HTZ $2-$3-$21) was on a tear, rising from around $15/share at the start of the year to over $20/share by mid-February. Then the unthinkable happened. Suddenly, the battered firm, which is now worth just $400 million and is loaded to the gills with long-term debt ($20 billion), has determined its only option is to declare bankruptcy. The company wasn't exactly a well-oiled machine before the health crisis, however. In addition to competing with a transformational change to the industry thanks to ride-sharing services like Uber and Lyft, Hertz made a big bet on sedans—as opposed to SUVs—to replace its aging fleet of vehicles. This at a time when renters were flocking to SUVs and avoiding sedans. Then there was the less-than-stellar acquisition of Dollar Thrifty in 2012 for $2.3 billion. The firm planned to go after the vacationing American family—as opposed to sticking with its bread-and-butter business traveler niche. In the end, it alienated both segments and created a massive bundle of debt it simply couldn't manage. Very few industry analysts saw the meteoric rise of the ride-hailing services, but Hertz screwed up most of the last decade long before Uber or Lyft or COVID-19 came along. In 2014, the century-old company had a market cap of $14 billion. Who stands to lose the most by the Hertz bankruptcy? Carl Icahn invested around $1.5 billion in the firm back in 2014 and still owns 40% of the soon-to-be-worthless shares. |
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UBER
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Uber shares drop about 4% after the ride-hailing service loses its London license. (25 Nov 2019) In a move stinking of politics, and cronyism, London's transport regulator has ruled that Uber (UBER $26-$28-$47) is "not fit and proper" to remain in operation in the city. The organization, clearly on the side of London's black cabs (their version of the local taxi services), made the claim that Uber placed passenger safety and security at risk, yet it gave scant evidence that there was any higher risk for a Londoner to ride in an Uber versus a black cab. Of course, the highly-partisan mayor of London and enemy of free enterprise, Sadiq Khan, celebrated the decision, clamoring that Uber had "directly put passengers' safety at risk." The Independent Workers of Great Britain (IWGB) labor union has called the move a "hammer blow" to Uber's drivers and is demanding to meet with the mayor. For its part, Uber, which has 45,000 licensed drivers in the city, said it will appeal the decision. It has a 21-day window to do so, during which it may continue to operate. This is nothing short of a hit-job by a government organization against a legally-operated private entity. For business owners, this should serve as a reminder to have a strong documentation and risk management system in place, and to constantly be evaluating the landscape for potential threats.
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UBER
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Shares of Uber hit a fresh all-time low as insiders become eligible to sell shares. (06 Nov 2019) In fairness, "all-time low" equates to the short, six-month period since the company went public, but shares of Uber (UBER $28-$27-$47) did, indeed, punch through their former low of $27.97 by about a buck as 1.5 billion of the 1.7 billion outstanding shares are now eligible to trade. For many early investors, that meant running for the door and dumping the shares. In fact, Wednesday was the second-most-active day for UBER shares (IPO day one was the most active), with over 90 million of them trading hands at an average price of under $27. But is this rational? These early investors were certainly thrilled to get their shares before the rest of us, so shouldn't they love the shares even more now that they are down over 45% from their high? Granted, one of our favorite metrics to look at when evaluating a company for purchase, year-on-year growth of quarterly earnings per share, doesn't even exist for UBER—that would require actual earnings per share. But this is not WeWork or Pets.com. This company will still be viable in a decade and, dare we say, profitable by then. This implies a fair value does exist for the shares right now at some dollar amount. We predict early investors will look back on today and kick themselves all over again. As primarily value investors, it is tempting to buy today as all the rats are fleeing the ship, but we can't. If we had to put a fair value on Uber, we would say around $40 per share—a whopping 50% jump from where they are now. Our conviction on that number just isn't strong enough to make the move.
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UBER
LYFT TSLA |
After Uber shoots for a valuation of up to $100 billion, investors flee Lyft. (10 Apr 2019) We always knew that Uber was the big ride-hailing service out there, despite all of the drama at the firm over the past year or so. No doubt, Lyft (LYFT $66-$60-$89) thought they would take some of the air out of the sails of Uber by beating them to the public market. Boy, did that ever backfire. After a rough start (shares topped out at $88.60 on IPO day before tumbling), Lyft's shares seemed to be stabilizing, at least until Wednesday. After Uber announced that it was shooting for an IPO price between $48 and $55, giving it a valuation of as much as $100 billion, Lyft shares plunged another 11%, dropping below their all-time (OK, it's only been a week) low. Why the drop? Uber lead underwriters Morgan Stanley and Goldman Sachs were floating a valuation of $120 billion or so as recently as late last year. Ironically, it was Lyft's poor performance in their own debut that led to the more conservative figures from Uber, that led to another drop for Lyft. If you want to gamble on this industry, which is only going to get bigger as more and more urban-dwelling Americans ditch their cars, we would recommend picking up some Tesla shares at their current price of $227, and wait for that company to build out its planned autonomous ride-hailing service. At least you know they also build vehicles for a living.
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LYFT
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Lyft hit correction territory—on its first full trading day. (02 Apr 2019) Just a few short years ago, Uber's founder and then-CEO Travis Kalanick wanted to take out the company's much-smaller competitor in the ride-hailing space, Lyft (LYFT $78-$69-$89). That company's founders, despite their firm's small relative size, said no thanks. Kalanick didn't stop there. If he couldn't buy the company, he could at least get their drivers to defect. Uber would have operatives order Lyft rides so they could attempt to cajole the drivers into changing teams.
Then, almost out of nowhere, the high-flying Uber hit some serious bumps on the road to the Exchange. After a slew of lawsuits and bad press surrounding everything from the theft of trade secrets to charges of sexism, the man who started the company found himself out of a job. Talk of an IPO was put on hold as Dara Khosrowshahi, the former CEO of Expedia, was brought in to clean up the mess. Three years ago, few would have believed that Lyft had any chance at all at beating Uber to the IPO market. Nonetheless, there they were, ringing the opening bell at the Nasdaq last Friday. Initially setting a price between $62 and $68 per share for the IPO, they raised that price to $72 due to heavy demand. Virtually within minutes of opening, investors were paying $88.60 per share for the seven-year-old company—valuing the firm somewhere in the $25 billion range. Sure, relative chump change compared to Uber's $120 billion ballpark, but still, quite impressive. Then Monday hit. It was as if investors suddenly sobered up to the realization that Lyft lost nearly $1 billion last year, up from the nearly $700 million they lost the prior year. In a flash, Lyft found itself in correction territory, with shares closing down over 20% from their $88.60 high. What does this portend for Uber's IPO later in the year? In our opinion, probably not much. In fact, we believe that a number of large investors have been keeping their powder dry for the big dog in the space. Lyft's IPO presents a great lesson for investors. We remember managing client assets back during the turn of the century, when investors would call in to see if they could get in on the latest and greatest dot-com IPO, like InfoSpace or pets.com. It may be twenty years later (the frenzy seemed to peak in 1999), but the memories are still fresh in our minds. Our advice? Be patient. From Uber to Pinterest to around one hundred other unicorn IPOs heading our way, there will be plenty of time to get in on some great bargain-basement prices—many coming well after that first day of trading. |
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UBER
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Uber allowed to operate again in London—for trial period. Ride-hailing service Uber just scored a huge victory in a British court, getting permission to operate in London once again, at least for the next fifteen months. Last September, regulator Transport for London failed to renew Uber's license in the city for not being "fit and proper" and showing a "lack of corporate responsibility." Odds are, however, that Mayor Sadiq Khan's recommendation that the license not be renewed played a major role. It will be interesting to see what kind of roadblocks city officials put up to make Uber stumble over the next 15 months. The company employs around 35,000 drivers in the city. How important is the city to Uber? It has been one of the company's largest worldwide markets.
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The
Boring Co. |
Musk's Boring Company gains approval to build high-speed express between downtown Chicago and O'Hare International. (14 Jun 2018) The Boring Company, an infrastructure firm created by Elon Musk to build tunnels for his futuristic transport pods, just landed a really big contract: building a high-speed system in Chicago between downtown and O'Hare International Airport. The goal is to cut down travel time between the two points to around twenty minutes. For anyone who has ever traversed the congested, anger-filled highways of Chicago, that is a remarkable goal. The system, which will be financed by The Boring Company, won't use Musk's Hyperloop technology, as the short distances negate the need for vacuum propulsion. Instead, mechanically-operated pods traveling through the tunnels will carry up to 16 passengers and their luggage, with subsequent vehicles departing as frequently as every half-minute. What does Musk and The Boring Company get out of the project? In addition to the fares, which may cost riders around $20 to $25, the company would have an incredible project to market and advertise as it seeks out other municipal projects around the world.
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Uber
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Federal judge hands Uber a win—and organized labor a loss—in workers' status case
(13 Apr 2018) Let's try the common sense test on this one. Forget any political leanings you may have and answer this question: are Uber drivers independent contractors or employees of the company? Let's try it another way: could an employee of a company come into work whenever they want and take as much time off as they want? A number of agencies and groups in left-leaning states have filed cases against the ride-hailing service, claiming that Uber drivers should be treated as employees, with all of the codified rights of employees. Now, a federal judge in Philadelphia has made a ruling: Uber does not exert enough control over its drivers to qualify them as "employees" of the company. This follows a Florida state appeals court ruling last year that came to the same conclusion. It's a crazy world out there; how refreshing to see common sense still prevail in some areas of the judicial system. |
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Uber
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Uber halts autonomous vehicle testing after pedestrian death in Arizona
(19 Mar 2018) Following the death of a pedestrian in Tempe, Arizona who was hit by an Uber autonomous vehicle, the company has temporarily halted all testing of the units. Police in Tempe verified that, while the car was operating autonomously, there was a human safety driver behind the wheel when the accident took place. The police report has yet to be released, but we know the 49-year-old female victim was crossing the street—outside of a designated crosswalk—at roughly 10 p.m. Sunday night when struck. |
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Uber
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Uber hid cyberattack affecting the personal information of up to 57 million users
(21 Nov 2017) What else could possibly go wrong with Uber? After a stellar start and a highly-anticipated IPO being discussed, the wheels began to come off of the ride-hailing service when sexual harassment lawsuits began to surface. After that, it has been one crisis after another for the firm, which replaced CEO Travis Kalanick earlier this year. Now comes reports of a security breach that exposed the data of 57 million users and drivers for more than a year. What's worse, the company apparently knew about the hack and kept it secret. Even worse than that, executives at the firm gave the hackers $100,000 to "delete the data" and keep the incident private. It also appears that Kalanick knew about the breach. If the new CEO can actually pull off a successful IPO within the next few years, he is a miracle worker. |
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UPS
FDX AMZN |
UPS, FedEx fall as Amazon reportedly testing enhanced delivery system
(05 Sep 2017) Shares of both UPS (UPS) and FedEx (FDX) were down at Thursday's open on reports that Amazon (AMZN), an enormous source of revenue for the firms, is experimenting with its own two-day delivery system. The project, called "Seller Flex," has been undergoing testing in India for the past few years, and certain West Coast states since the beginning of this year. A more full-scale rollout could come in 2018. Both shipping giants were off just over 2% on the news. This system would certainly have an impact, but we believe this impact will be dampened by the slew of other American companies now competing with Amazon in the e-commerce space. |
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UBER
EXPE |
Uber selects Expedia CEO to run company
(28 Aug 2017) Shunning uber-clowns Jeffrey Immelt and Meg Whitman, troubled ride-hailing service Uber has chosen Expedia (EXPE $106-$142-$161) CEO Dara Khosrowshahi to be the company’s new boss. He will immediately face a number of challenges at the company, such as the sexual harassment suits, a lawsuit by early investor Benchmark Capital, a loss of key talent, and low morale among employees and drivers. Not to mention the challenge of making the company IPO-worthy once again. Expedia was off 5% on the news. |
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Uber
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(21 Jun 2017) Uber CEO resigns. After months of bruising scandals, Uber Technologies Inc.'s embattled CEO, Travis Kalanick, has stepped down from that role. Just one short year ago, Kalanick had the world in his hands, with a probable upcoming IPO that would make him a billionaire, or close to it. Now, as the company tries to regroup from sexual harassment lawsuits, threats from Tim Cook to kick Uber out of its app store, and a host of other problems, the company has turned a page. Just one problem—nobody seems to have any idea who will lead the company now that Kalanick is gone (a management committee will run the firm in the interim), and talent continues to head for the exits.
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