“You don’t own enough Uber stock.”
I mutter those five words to myself every time I come back from a business trip.
I just returned from a whirlwind week in California, where I met startup founders and entrepreneurs in exciting areas like robotics, nuclear tech, and supersonic flight.
I must have spent $500 on Uber (UBER) rides, zig-zagging between the LA area’s different cities for meetings.
I took an Uber to the airport. Then another to my hotel. Meeting across town? Uber again. It’s the default. No thinking, no comparing. Open the app, tap, go. I was practically living in the Uber app.
I joked with RiskHedge publisher Dan Steinhart that we should’ve rented a car. Dan would’ve been driving, though, because little-known fact: I don’t drive.
No complaints. Uber has always been a phenomenal service. Now, it’s becoming a great business. And self-driving cars will only turbocharge this business.
You’ve surely heard about Waymo by now. It’s Alphabet’s (GOOG) self-driving car service.
Waymo is quietly scaling up its operations across America.
In San Francisco, I couldn’t walk five minutes without seeing one of its white self-driving Jaguars. Talking to folks around town, everyone mentions their Waymo experience. Is Waymo the biggest tourist attraction in SF right now?
Last month, Waymo launched in its fourth city: Austin. Folks are going crazy for it.
Look at Waymo’s Austin growth rate below, in black. Waymo completed almost twice as many rides as it did in San Francisco in the first month… 4X more than in Los Angeles… and 8X more than in Phoenix:
Source: The Motley Fool
What’s so special about Austin?
You can now book a Waymo ride inside the Uber app.
That tiny app tweak is a big deal. Uber has over 150 million users, many of them like me who automatically open the Uber app when they need to get somewhere.
Getting people to download a new app and share their credit card details with an unfamiliar company like Waymo is hard.
I also learned in San Francisco that “foreigners” can’t download the Waymo App. I tried everything to get a Waymo in SF, but because my iPhone was connected to Ireland, it wouldn’t let me download it. C’mon, Google!
In Austin, it’s different. Robotaxis are only a click away via Uber.
Waymo robotaxis already make up around 20% of Uber rides in Austin. And Uber collects a little fee from each one.
It lost over a billion dollars on it. Then, Uber made a smart pivot.
In 2020, Uber sold its self-driving division. That let Uber offload the high R&D costs and focus on what it does best: running the platform that connects drivers and passengers.
Waymo isn’t the only self-driving company using Uber’s platform. Serve Robotics (SERV), Cartken, and Avride make box-shaped delivery robots. You may have seen them driving on sidewalks delivering Uber Eats.
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Uber’s CEO has said it wants to partner with Tesla (TSLA) when it launches its robotaxis.
Uber’s approach is genius. Guess where every self-driving company will want to list? On the Uber app, instantly connected to 150 million customers worldwide.
In Austin, Uber is building maintenance hubs where autonomous vehicles can get fixed and cleaned…
Charging stations for electric robotaxis…
And operational centers to coordinate fleets, optimize routes, and reduce downtime.
This means Uber won’t only collect fees from self-driving cars, but also from robotaxi companies looking to manage their fleets.
Longtime RiskHedge readers will remember what I said ahead of Uber’s much-hyped 2019 IPO: “Buying Uber is the dumbest thing you can do with your money in 2019.” Back then, Uber already had a great product, but its business was awful.
I turned bullish on Uber in September 2022 before the stock tore to all-time highs:
Today, Uber is profitable. It’s operating with a leaner and more efficient business. And it’s still growing sales by 20% a year.
It’s the only ride-hailing stock I’d own.
Compare Uber’s five-year chart to rival Lyft (LYFT):
The self-driving car megatrend is notoriously hard to invest in. Uber is the ultimate self-driving car stock, hiding in plain sight. Two years from now, I think the public will realize this in hindsight.
Now is your chance to buy it before the crowd catches on.
Stephen McBride
Chief Analyst, RiskHedge