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Dara Khosrowshahi took on the top job at Uber (UBER) in September 2017 when the company was going through a crisis of confidence and pressure from investors led to the resignation of its CEO and founder Travis Kalanick. Mr. Khosrowshahi who had spent the prior 12 years building Expedia (EXPE) into a travel juggernaut took Uber public in May 2019 at $45 per share and after a lot of ups and downs the stock ended last Friday just below that IPO price. Mr. Khosrowshahi made his largest insider purchase of Uber last week when he spent $9 million on a direct open market purchase of 200,000 shares at an average price of $44.92.
The company has continued to lose money but it was able to offset some of the impact of the COVID-19 pandemic through other lines of business like Uber Eats, delivery of packages and the ability to rent cars. Uber has been on my mind recently after I heard from several friends that Uber rides are costing more these days but people are still using them because they have grown used to the convenience and reliability of Uber. It looks like under Dara, Uber might finally use its scale and network effects to build a diverse line of counter-cyclical businesses that would one day lead to profitability. Prior to Uber, Dara was mentored by Barry Diller at IAC during his seven years at the company and worked as an investment banker at Allen & Co. According to this Recode article,
“Dara is the smartest, most passionate and thoughtful executive I’ve worked with in 25 years,” said Burke Norton, former Salesforce and Expedia senior exec. “He has super high integrity and is a phenomenal leader — the kind of leader whom people would follow into a burning building.”
When I looked at my phone this morning, Uber was offering a discount on its $9.99/month Uber One subscription service that gives subscribers $0 delivery fees and priority service for Uber rides. This is another way Dara is attempting to build a sustainable and predictable business at Uber. When investors think of Uber, they are immediately reminded of its much smaller rival Lyft (LYFT). While both companies are in the ride hailing business, that is where the similarities with Lyft end. Uber is growing faster than Lyft, globally diversified and has better gross and net income margins. While Lyft has a stronger balance sheet, Uber’s has a 12% stake worth nearly $5 billion in Chinese ride hailing service Didi (DIDI) that went public in June 2021 at $14 per share.
It may take some more time before Uber finally becomes cash flow positive but the company appears to be headed in the right direction. It is encouraging to see that several other insiders have been exercising shares without selling them, which we view as a positive signal. The stock is likely to be volatile in the coming months and may provide opportunities to investors to build a position in the company over a period of time. I plan to do a deeper dive into the company in the coming week like I did with Opendoor (OPEN), Airbnb (ABNB) and Netflix (NFLX) in the following three articles,