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Morningstar | Uber Analysis Proves Timely: SEC Looks to Let More Small Investors Into Private Equity Fundraising

On Aug. 30, The Wall Street Journal reported that the SEC is considering options that allow retail investors the opportunity to take part in fundraising for private companies, such as Uber and Airbnb. In July, and in collaboration with PitchBook, we published detailed reports on these sharing-economy companies and rated both with narrow economic moats.

We value Uber at a $110 billion market capitalization, above the company’s implied $72 billion valuation after Toyota recently invested $500 million in the firm. Reports suggest that Uber is likely to go public during the second half of 2019. This ride-sharing service provider that sits at the number-two spot in the world (based on rides hailed) is attempting to gain traction in what we estimate to be a $630 billion addressable market by 2022. We think Uber's core business, the ride-sharing platform, warrants a narrow economic moat rating, as it has displayed moat sources such as network effects and intangible assets. We project that Uber's net revenue will grow at a 27% average annual pace over the next 10 years. We foresee Uber continuing to spend on expansion and research and development but think it will become profitable by 2022.

We also think Uber may leverage its moaty ride-sharing business and tap into other growth opportunities, including bike-sharing, meal takeout and delivery, freight brokerage, and ride-sharing via autonomous vehicles. In our view, autonomy is the most transformative technology set to affect the world of ride-sharing; we see powerful economic forces driving autonomous vehicle adoption in the ride-sharing industry, from which Uber may benefit. We note that risks remain, such as increased competition from various companies, including Alphabet (Waymo), General Motors, Tesla, and Grubhub. Further, legal issues, which gave Uber a tainted reputation under former CEO Travis Kalanick, persist, although we believe that under CEO Dara Khosrowshahi, Uber will see better days.

For more detail on Uber and Airbnb, please see our July 2018 reports "Uber May Pick Up Investors, Along With Riders, in Its IPO" and "Airbnb's Network Effect Offers Investors a Unique Stay."