Shopify Shines and Uber Declines

**Travis Hoium** (0:02)
It's earning season, and we're jumping in with both feet. Motley Fool Hidden Gems Investing starts now.
Welcome to Motley Fool Hidden Gems Investing. I'm Travis Hoium, joined today by Lou Whiteman and Rachel Warren. And Rachel, we got a lot of earnings to cover. We're going to get to Shopify, one of the stocks that I'm sure a lot of foolish investors own. That's having a phenomenal day today. We're going to start with Uber. Not such a great day, down about 5% as we're recording early in the day. The numbers weren't terrible.
22% increase in the number of bookings, trips were up 18%, revenue was only up 12%. But that was actually due to a little bit of an accounting change on the way that they account for the revenue. So the bottom line is maybe a little bit more important, and that was up, operating income at least, was up 40%. What do you think Wall Street is having such a negative reaction for?

**Rachel Warren** (0:55)
I honestly think that Wall Street and the market are being unnecessarily hard on Uber. They reached a major milestone trailing 12-month free cash flow, surpassed $10 billion for the first time ever. Gross bookings jumped 24% year over year, $58 billion total. The CEO noted that they had a wave of growth linked to the FIFA World Cup. There were more than 8 million tourists that utilize the Uber platform across the North American host cities during the tournament. We saw in July that Ubers agreed to acquire Germany-based delivery hero in a nearly $15 billion deal. This is really important to expand their market share in international food and grocery delivery. The thing that I'm really interested right now is the way in which they're investing in their AV Labs division. Uber is committed to spending more than $10 billion over the coming years on this new division. Their CEO has said as the industry is moving from testing tech into mass market deployment, they really want to position their network as the commercialization engine for every player in the space. This is really interesting. I mean, we've seen the changing dynamic with Alphabet's Waymo. We had that announcement a little while ago that they're ending their exclusivity agreement in Atlanta and Austin by early 2028 Uber is really looking to mitigate any reliance on any single provider.
In their earnings remarks today, management was talking about their rapid expansion with a UK-based company called Wave, which just secured critical private hire of vehicle licenses to launch automated rides on Uber in London. They've got integrations with other companies like WeRide, Azukes, which of course is owned by Amazon, Neuro. They also have a multi-year deal to put 10,000 custom Rivian R2 robotaxies exclusively on the Uber network by 2028
I think there's a lot of exciting things happening with this company. I don't understand why the market is so hard on it.

**Travis Hoium** (2:52)
Full disclosure, this is one of my bigger holdings because I think generally the market has this wrong. The disruption story is not necessarily going to come for Uber. Rachel touched on it, the autonomous vehicle story is really something I think a lot of investors are thinking about. But one of the numbers that stuck out to me is they're expecting to have autonomous operations up in 15 cities by the end of this year with more in 2027
So it seems like the strategy that Uber has laid out over the past year or two is really starting to come to fruition and we may actually be reaching an inflection point. But does that just not matter right now?

**Lou Whiteman** (3:28)
Well, I think we have to see it and not, I mean, it's one thing to say it, it's another thing to actually do it. So go ahead and do it and then say, I think, look, maybe it's just because of, maybe it's Tesla's fault, but I think there are a lot of people who want to see these robo taxes out there and not just believe it's coming. I mean, look, with all respect, partnering with Rivian to have, because Rivian is going to be out by 2028 I'll probably take the over on that array.

**Travis Hoium** (3:54)
Yeah, Rivian does not actually have an autonomous fully autonomous vehicle, even in testing yet.

**Lou Whiteman** (3:59)
Right, exactly. But yeah, so I think there's a lot of, that's sort of where we are. I mean, what went wrong here? What's going on? I mean, I'll take the other side of the argument just to do it.
They did miss on revenue. The guidance was underwhelming. Maybe that's accounting. Maybe that's, you can blame the analysts more than you can blame the company there, maybe, but it wasn't. And they need to communicate that better or figure it out, because I think the guidance was especially, I don't know, disappointing for Wall Street. But yes, this is a 35 percent revenue growth company drifting towards a 20 PE. Something has to give here. And if you are right, and if we are just on the verge of this autonomous breakthrough, then yes, this is undervalued. If we're not, though, what is going on? This divorce with Waymo is getting messier by the day. They're trading pot shots. Apparently Uber doesn't do a good enough job cleaning the cars now. Is that, I mean, this is like when the relationship is over and couples fight about stupid things, that's the level we're on. I mean, congrats. The people came to the World Cup and used your vehicles. That's not sustainable.