Billionaire investor Bill Ackman made headlines on Friday when he disclosed his hedge fund's major investment in Uber Technologies Inc., sending the company's stock soaring to its highest level in months. Ackman's Pershing Square Capital Management now owns 30.3 million shares of Uber, valued at about $2.3 billion. This announcement has contributed to a significant rebound for Uber shares, which were initially down following the company's fourth-quarter earnings report.
The stock jumped nearly 9% on Friday alone, marking its best two-day run since early 2023. This sudden increase follows Uber's turbulent week, where it saw its stock plummet by 8% after its earnings report, only to recover with continuous gains thereafter. Uber's stock price increased by 14% during the week, adding approximately $20 billion to its market capitalization.
Ackman took to social media platform X, formerly known as Twitter, to express his optimism about Uber's future. He stated, "Uber is one of the best managed and highest quality businesses in the world. Remarkably, it can still be purchased at a massive discount to its intrinsic value." These words have sparked considerable interest among investors, reinforcing the view of Uber as undervalued.
Ackman's sentiment reflects growing consensus among analysts and investors alike, who believe Uber has transformed from its cash-burning past to a highly profitable entity. Notably, the company generated $6.9 billion in cash over the last year, significantly up from $3.4 billion the previous year, demonstrating its turnaround under CEO Dara Khosrowshahi since he took the helm in 2017.
Throughout the week, the volatile nature of Uber's stock presented opportunities for investors. Despite the initial downturn post-earnings, Ackman's endorsement and his substantial stake have revitalized interest, making Uber the top-performing major stock as it defied broader market trends. While many companies struggled amid inflation concerns and tariff issues, Uber surged.
Interestingly, Uber trades at 18.7 times its free cash flow, making it attractive compared to other prominent technology stocks. For example, Tesla has a price-to-free-cash-flow ratio of 397, Palantir at 168, and Nvidia at 62. This suggests investors may view Uber as having more potential for growth at its current price.
Ackman's investment was also notable due to his history with Uber; he revealed he was one of the early investors through a venture fund and has been tracking the company's progress since its inception. He emphasized this longstanding relationship by stating, "I was also fortunate to be a day-one investor in the company through a small investment in a venture fund."
His backing is especially impactful considering his reputation as one of the investors who typically adopts few new positions. With Pershing Square focusing on concentrated investments, Ackman's commitment to Uber has drawn attention not only to the company itself but also to the broader market's perception of tech stocks.
Many analysts and investors are expected to closely monitor any upcoming comments from Ackman about his investment thesis. Speculation about what this may reveal concerning Uber's future has already started circulating, adding to the buzz around the company's stock. Analysts anticipate continuing gains for Uber, with many rating the stock as a strong buy due to its potential for future growth and profitability.
Given Uber's drastic changes over the past few years, the ride-hailing service's stock could be at the start of another upward trend. The concept of autonomous taxi services, particularly the competition with Tesla and others, is also frequently discussed as investors evaluate the market's direction. Investors recognize the substantial potential for Uber to continue to be at the center of this ever-evolving industry.
Ackman concluded his remarks by acknowledging the influence of Uber's management team, noting their role in the company's transformation. He remarked: "Since he joined the company, Dara Khosrowshahi has done a superb job transforming it. We believe Uber has now become one of the best-managed companies out there."
This endorsement coupled with Ackman's massive financial commitment has underscored Uber's significant strides within the dynamic and competitive space of ride-hailing services. His investment may provide not only the needed confidence for investors but also stimulate discussions about the future of Uber and its pathways to success.
Moving forward, it’s clear how influential figures like Ackman can catalyze positive responses from the market and amplify interest among potential investors. The buzz around Uber will likely continue to grow, with investors eager to see how the ride-hailing giant capitalizes on its recent success under Khosrowshahi's leadership.