Uber: The Flywheel Keeps Turning and Likely Will Award the Patient Narrow-Moat Uber Shareholders

We are increasing our Uber fair value estimate to $80 from $74 as the firm provided better-than-expected margin expansion guidance during its analyst day. Uber's expectations regarding the top-line growth and its drivers were in line with our projections. On the margin front, while we had already assumed lower user acquisition costs going forward due to the strong network effect, it was still above Uber's guidance. Plus, the firm expects implementation of artificial intelligence to reduce its customer support costs as a percentage of gross bookings. Overall, the network effect moat source, a leaner operation, and continuing gross bookings and revenue growth are likely to create further operating leverage and drive impressive 30%-40% average annual adjusted EBITDA growth the next three years, with more than a 90% free-cash-flow conversion. The Uber board also announced a $7 billion share buyback authorization.