In the ride-hailing services industry, there’s Uber and everyone else. The company’s scale is unrivaled and its financial results no longer resemble a risky startup. Uber just published its Q1 report, showing 17% constant currency revenue growth and $2.3B in free cash flow this quarter alone. If its growth plans come to fruition, its annual FCF could reach $13B in 2026. This might make investors wonder if the stock isn’t actually a bargain right now, given the company’s ~$180B market cap.
We were thinking along the same lines, but two things are stopping us from buying right away. The first is that ride-sharing, and the taxi business in general, is very cyclical. People simply ride less when the economy is weak. Even the mild economic deceleration we saw in 2022 caused a two-thirds decline in Uber’s valuation. J.P. Morgan recently raised the probability of a US recession in 2025 to 60%, which doesn’t bode well for cyclical companies.
And the second reason why we don’t worry about missing out on the stock is the Elliott Wave chart below.
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It reveals two five-wave impulses, interrupted by that 2021-2022 bear market in between. The first one is marked I-II-III-IV-V, where the five sub-waves of wave III are also visible. The second one is labeled (1)-(2)-(3)-(4)-(5), where two lower degrees of the trend are recognizable within wave (3) and wave (4) is a triangle correction.
Given Uber’s strong fundamentals and long growth runway, we think that these patterns stand for a sequence of first and second waves of a much bigger future uptrend. That being said, every impulse is followed by a correction and this applies to the current wave I, as well. Not to mention that triangles precede the final wave of the larger structure.
Here, the final wave is (5), and it is likely to be entirely erased by wave II, before the bulls can return in wave III of (III). Assuming a bearish reversal near $100 a share, that’ll be a ~40% decline back to the support just under $60. We plan to take advantage of it to add Uber to our stock portfolio, but as of this writing, we see no reason to hurry.
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