jschroeder said:
Uber lost 3 BILLION last year, they don't have anything left to squeeze out of their drivers, can't raise their prices because of the competition in the market, and have corporate culture issues out the whazoo.
The Techcrunch Equity podcast had an interesting point when they said you don't see so many "former employees" of pre-IPO companies that are actually on an upward trajectory. There are deep, deep issues with the Uber and Lyft business models.
While I would agree with you if you said Uber was likely overvalued at over $70b, I'm not sure I can agree with you that it's business model is flawed. Reporters love to throw out the $3 billion in losses, but it's impossible to have any idea what future cash flows would be without digging into more financial data.
Uber is spending money all over the place to scale up their business. Even beyond new markets, they are investing in delivery and trucking services. Their goal right now is to achieve huge growth rates in a similar manner achieved by google, facebook, and amazon (note: these are completely different businesses, but all require huge scale). These investments cost money and you would expect a company like that to be operating in the red.
Their current, primary business model is taking a cut of of a better, more convenient taxi service. Their current valuation is about 3x the current taxi market (estimated between $20-25b). This would suggest their valuation is too high, but they see themselves changing the entire $1 trillion plus transportation industry. Their long term goal is to completely displace car ownership and be the primary vehicle for your daily transportation, but that will only happen if they can utilize self driving cars to bring down the cost of ride-sharing services to be competitive with the cost of ownership. I think they will eventually get there, but how fast and what the market looks like at that point is a big question. Their delivery and trucking services could be interesting, but they are in infancy, so it's hard to say whether those will be profitable. Their are certainly lots of risks built into the huge valuation the latest round of investors are buying in at.
From a pricing perspective, there are very few players in the market. Some markets only have one alternative to a taxi. In addition, most people have a preferred ride-share app and not many compare prices. Their current price structure is meant to grow market share in most of their locations. If they achieve the massive scale they are seeking, it will be difficult to compete with them on price.
Their internal management issues do present a cause for concern and will slow their growth rate, but they have a pretty big head start in front of lyft. I would think a new management team could stop the distractions and keep uber focused on their business.
TL/DR: Valuation may be a problem but business model is not.
