Why I Bought More Uber Shares as the Stock Fell
Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.
Uber is the second most controversial stock I’ve ever owned (first place goes to Softbank). Most people have used Uber’s service, and thus everyone has an opinion and the media loves writing articles about Uber. The company has a history of not making any money. I’ve written a long research piece on why Uber, despite (or maybe because of) being a controversial company, has the makings of being a terrific long-term investment.
The pandemic had a mixed impact on Uber. Its core ridesharing business, which was supposed to turn profitable right before the pandemic, was significantly affected by the virus. The impact was immediate – people stopped traveling and started socially distancing.
But even after the economy reopened and people were willing to take Ubers again, the company did not just snap to profitability; it had to rebuild its driver network. Uber had to pay extra bonuses to drivers, whose pockets had just been stuffed with government stimulus checks, to get them to put their Netflix remote controls down, get off the couch, and start driving again. This was very expensive but necessary – one of Uber’s competitive advantages lies in the depth of its driver network. Without drivers, Uber rideshare has no product. Consumers expect to push the button on their Uber app and get a car in 15 minutes or less. I remember worrying in spring 2021 that Uber would take a conservative stance in bringing their drivers back in order to preserve cash. Uber did anything but – it showered its drivers with cash, burning billions of dollars in the process. It was the right thing to do. Lyft has been slower to respond and is still struggling with a driver shortage, where Uber doesn’t have this problem. I am glad that I bet on the right company and the right management.