Uber Technologies (UBER -1.88%) operates the world's largest ride-hailing network, in addition to highly successful food delivery and commercial freight networks. The company is on the cusp of a major transformation thanks to autonomous technologies.
Uber has signed 14 partnerships with developers of self-driving cars, robots, and even aircraft so far. Since human drivers are the company's largest cost right now, the shift to autonomous solutions could result in hundreds of billions of dollars in savings over time.
In fact, I think Uber stock could soar fivefold over the next decade because of the potential boost to its revenue and earnings. Here's how it could turn a $200,000 investment into $1 million by 2035.
Image source: Getty Images.
Autonomy could transform Uber's economics
Over 161 million people use Uber's platform every month across ride-hailing, food delivery, and commercial freight. During the last four quarters, the company accepted $156.1 billion in gross bookings across all three of those segments. That figure represents the total amount customers paid for every ride, food order, and commercial delivery.
Of the $156.1 billion in gross bookings, Uber paid a whopping $69.7 billion to its drivers alone, which makes them the company's largest cost by a wide margin. After stripping out driver costs and the money paid to restaurants for food orders, Uber was left with just $41.9 billion in actual revenue.
Then, after the company accounted for its operating costs like marketing and research and development, it generated a generally accepted accounting principles (GAAP) net income (profit) of $4.8 billion. That represents a mere fraction of its gross bookings, which is why autonomous vehicles could have such a big impact on Uber's business.
If self-driving cars and robots reduce Uber's reliance on human drivers, they could put at least $69.7 billion back into the company's pocket each year. Some of that cost might be replaced by fees payable to the developers of each self-driving vehicle using Uber's network, but since they can operate 24/7 with negligible ongoing expenses, there will almost certainly be major savings.
Theoretically, Uber could also buy entire fleets of self-driving vehicles and operate them itself in order to pocket all the revenue.
Uber's partners are among the leading developers of autonomous technologies
As mentioned, Uber has already signed partnerships with 14 different companies that develop self-driving vehicles. One of the biggest is Alphabet subsidiary Waymo, which already completes more than 100,000 fully autonomous paid trips every week across San Francisco, Los Angeles, and Phoenix. The two companies recently expanded their deal to bring autonomous rides to Austin and Atlanta in 2025.
Uber is also partnered with Serve Robotics, a small-scale developer of autonomous robots designed for last-mile logistics like food delivery. Serve Robotics plans to build and deploy 2,000 new robots in 2025 that will be exclusively available on the Uber Eats platform. It will take more human drivers off the road across California, and potentially even Dallas and Fort Worth in Texas later in the year.
Uber also owns roughly 12% of Serve Robotics, so it will benefit significantly if the start-up becomes a raging success.
Some of Uber's other partners include Joby Aviation, which operates small self-flying aircraft, and Coco Robotics, which also develops robots for last-mile logistics.
All that said, Uber completed 10.8 billion trips during the last four quarters, so it could take years before there is enough autonomous capacity to service all of its customers. However, the company is making preparations for the long term -- it signed a deal with BYD last year to bring 100,000 human-driven electric vehicles (EVs) into its network, but the two companies will also collaborate on self-driving technologies to deploy in the future.
BYD is one of the largest EV manufacturers in the world, so it could bring significant scale to the autonomous industry in the coming years.
The road to fivefold growth by 2035
Based on Uber's trailing-12-month revenue of $41.9 billion and its market capitalization of $136.6 billion as of this writing, its stock trades at a price-to-sales (P/S) ratio of 3.2. That's a discount to its average P/S ratio of 4.2, going back to when the company went public in 2019:
UBER PS Ratio data by YCharts
Assuming Uber's P/S ratio continues to trade at around 4.2 on average going forward, the company will have to grow its annual revenue to $162.6 billion by 2035 to justify a fivefold gain in its stock. That translates to a compound annual growth rate of 14.5% over the next 10 years. Uber's revenue grew at a compound annual rate of 29.5% between 2017 and 2023, which is way above that mark. However, according to Wall Street's consensus estimate (provided by Yahoo!) the company's revenue growth likely slowed to 17.3% in 2024 (official results will be announced in February).
As Uber's revenue base balloons in size, it becomes harder to maintain high annual growth rates of 20% or more. Nevertheless, the company is still clearing the 14.5% hurdle quite comfortably, and autonomous vehicles might be the key to accelerating its growth in the future.
Remember, the company could gradually claw back almost $70 billion per year in driver expenses as it facilitates more autonomous trips, which will be added straight onto its revenue.
Therefore, I think Uber stock is a great candidate to turn a $200,000 investment into $1 million over the next decade. But investors with a starting balance of any size can benefit from a fivefold return if this scenario plays out.
