Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche

Market Insanity

Is Uber Now a Value Investment?

Uber Technologies Inc. might be a value investment. The master himself Warren Buffett tried to invest $3 billion in the troubled ridesharing giant earlier this year.

Uber turned Uncle Warren’s offer down, Bloomberg reported. The deal is similar to Buffett’s investment in Goldman Sachs (NYSE: GS) at the height of the great financial meltdown and his well-known buying of Amazon’s (NASDAQ: AMZN) corporate paper.

The $3 billion would have been convertible loan from Berkshire Hathaway (NYSE: BRK.B) to Uber. Uber would have had to pay the loan off regardless of what straights it was in. The loan would have given Berkshire an undetermined amount of equity in Uber.

Uber CEO Dara Khosrowshahi took one look at the deal and said no. His company refused the deal because it has $6.3 billion in the bank, Bloomberg reported. Khosrowshahi’s refusal makes Uber a good company, because the CEO chose control over extra cash.

Is Uber a Classic value Investment?

Uber is now a classic value investment because it is a good company with a good product that has been having serious problems. There’s nothing wrong with Uber’s basic service or business model just its corporate culture.

Now that Khosrowshahi is cleaning that mess up, Uber stands to greatly improve. Buffett called himself “a great admirer of Dara” in a chat with CNBC. The sage of Omaha pointed out that some of the details in the Bloomberg story were wrong.

Uber is still a good company with a value of around $48 billion, Recode reported. Investors speculate that Uber is worth around $48 billion which sounds about right not the $70 billion it was valued at last year.  This means Uber has lost 20% of its supposed value over the past year.

Uber is still an unstable speculative investment but it is an obvious moneymaker. Under good management, which it appears to have Uber might be profitable. Therefore, an Uber stock might be a good investment if it were cheap.

UberEats is worth $6 Billion

The meal delivery service UberEats is now worth $6 billion Khosrowshahi told participants in Code Conference at Rancho Palos Verdes, California.

“It’s now at a $6 billion bookings run rate, growing over 200 percent,” Khosrowshahi claimed. If true that would make UberEats the biggest meal delivery service in the world.

GrubHub (NYSE: GRUB) reported $3.8 billion gross sales in 2018, Recode reported. UberEats delivers food in nine of America’s 22 largest cities. Khosrowshahi did not say whether there are any expansion plans for UberEats, or if he is planning to sell the service to GrubHub. Uber is getting out of the rest of the delivery business by shutting down its UberRush service on 30 July 2018.

Uber CEO wants to Team Up with Waymo

Khosrowshahi wants to join Alphabet’s (NASDAQ: GOOG) self-driving car experiment Waymo.

The Uber CEO told Code Conference guests that he would like to join Waymo’s network, Recode reported. That would give Uber access to the self-driving Chrysler Pacifica minivans and Jaguar I-pace SUVs, that Waymo is testing in Phoenix, Arizona. It would also give Uber access to Avis Budget (NASDAQ: CAR)’s service facilities, Avis is servicing Waymo vehicles in Phoenix.

Not surprisingly Alphabet (NASDAQ: GOOGL) is reluctant to get involved with Uber. Last year Alphabet sued Uber alleging that a former Uber executive Anthony Levandowski stole thousands of files containing proprietary information from Waymo before selling his autonomous vehicle company Otto to Uber. The lawsuit has been settled and Levandowski and the man who hired him Uber founder Travis Kalanick are long gone but their stench remains.

One has to wonder if Uber’s autonomous car experiments are dead. It sounds as if Khosrowshahi wants to make Uber simply a ridesharing company and get out of the technology business completely. That would be a smart move.

Uber is now a company for value investors to watch. It has a lot of cash and good management.