Billionaire investor Bill Ackman, through his firm Pershing Square, has made a significant investment bet on Uber Technologies (ticker UBER). This move became public knowledge when Ackman posted about building a position on X on February 8th. Fast forward to today, and Uber has officially become the largest position in Pershing Square's portfolio, representing a substantial 18.5% of their $11.9 billion fund. This article explores the rationale behind Bill Ackman's investment in Uber.
This bold move by a high-conviction investor like Ackman prompts the question: What does he see in Uber? According to Ackman, Uber is significantly undervalued. His thesis suggests the company's share price could potentially more than double over the next few years. Bill also believes the market might be overlooking Uber's evolution from primarily a ride-hailing app to a global logistics and mobility platform (Uber Freight).
Key reasons supporting his view include the immense scale of the business, processing $160 billion in gross bookings annually, the powerful network effect creating a competitive moat, and the fact that operating leverage is significantly improving, leading to sustained earnings and free cash flow growth. This transformation from a cash-burning growth story to a more disciplined, profitable enterprise with expanding margins appears to be a core part of his bullish case.
Bill Ackman - Pershing Square Capital Management current holdings
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Bill Ackman Uber’s Investment Thesis Overview
The bold move stems from Ackman's belief that Uber is significantly undervalued at its current trading price. He suggests the company's share price could potentially more than double over the next few years.
Ackman's bullish thesis rests on several key pillars. First, he argues that Uber is no longer just a ride-hailing service but has transformed into a global logistics and mobility platform with immense scale and benefiting from a powerful network effect that creates a strong competitive moat.
Second, he highlights that operating leverage is significantly improving, turning Uber from a cash-burning growth story into a company with expanding margins and substantial free cash flow growth. This operational efficiency and discipline since 2017 are key to the margin expansion story.
Finally, Ackman views autonomous vehicles not as an existential threat but as a potential catalyst, positioning Uber to become the aggregator and interface for AV fleets by partnering with AV developers and leveraging its platform infrastructure and user base.
Uber is Beyond a Ride Hailing App
A core element of Bill Ackman's investment thesis for Uber is the idea that it has evolved far beyond its initial perception.
Ackman argues that most people still think of Uber as just a ride-hailing service — a glorified taxi app. However, he states that that couldn’t be further from the truth today. Instead, he emphasizes that Uber is now a "global logistics and mobility platform". This platform operates in over 70 countries, and Uber is the leading player in more than 30 countries. It acts as a connector, bringing together 170 million monthly active users with 8 million drivers and couriers.
The platform is not limited to just passenger transportation. It also includes a "delivery powerhouse through Uber Eats" and has fast-growing exposure to freight and enterprise mobility. Ackman notes that this business is still growing, with recent quarterly figures showing mobility bookings rising by 20% and delivery growing by 18%. This growth is seen as sustained and driven by new customers and increasing usage frequency. Ackman's perspective is that this transformation into a "platform business" is a key aspect of Uber's evolution from its earlier cash-burning phase, and the market may not have fully appreciated this shift, contributing to his belief that the stock is significantly undervalued.
Uber AV (Autonomous Vehicles)
Bill Ackman addresses the common concern that autonomous vehicles (AVs) could disrupt Uber’s business model by rendering human drivers obsolete. Critics argue that once AVs become mainstream, companies like Tesla or Google (Waymo) could launch their own ride-hailing services using self-driving fleets, undercutting Uber’s market share and taking away its primary revenue source. They suggest that AV operators, being a small group of powerful firms, would have the leverage to undermine Uber’s current 20-30% take rate, leaving Uber unsustainable.
Ackman counters this narrative by claiming that the fear surrounding AVs is “completely overblown.” He argues that building an economically viable, fully autonomous rideshare network is far more complex than simply deploying AVs, especially when considering the issue of demand variability.
Rather than competing with AV operators, Ackman suggests that Uber is already integrating itself into the AV ecosystem by partnering with companies like Waymo and Aurora. He highlights that Uber’s established platform and infrastructure make it the ideal partner for AV fleets, helping them manage demand fluctuations. With global reach, real-time dispatching, and a large user base, Uber would provide AV operators with scalable solutions, making Uber essential infrastructure in the future of AV ride-hailing. Instead of being displaced by AVs, Ackman believes Uber will thrive by leveraging its existing platform and becoming a key player in the autonomous vehicle market.
Uber’s Valuation
Bill Ackman views Uber Technologies (UBER), currently trading around $88, as significantly undervalued. His firm, Pershing Square, believes the company's share price could more than double over the next few years.
This valuation target is derived from a calculation based on Uber's future potential. Pershing Square projects Uber achieving long-term EBITDA margins of 7% on its substantial annual gross bookings, which currently stand at $160 billion. Applying a 20x EBITDA multiple to this projected $11 billion in long-term EBITDA ($160B * 7%) yields an enterprise value of $220 billion. After subtracting modest net debt and dividing by the shares outstanding, this leads to their approximate target of $105 per share.
While some investors might look at Uber's current valuation, such as its trading at about 29 times forward earnings, and consider it expensive, Ackman's perspective is different. He argues that this multiple doesn't fully reflect the company's transformation and future potential. He sees Uber as a company that is growing earnings at over 20% per year, has compounding free cash flow (up 105% year-over-year in 2024 to $6.9 billion), is accelerating share buybacks, and has long-term margin targets (the 7% mentioned earlier) that are not yet priced in by the market.
Furthermore, the $105/share calculation is considered a base case and does not even account for potential "optionality" in areas like advertising, freight, autonomous vehicle partnerships, or Uber for Business. If any of these additional growth avenues significantly take off, it could further enhance the company's value.
Ackman summarizes his valuation view by stating that the combination of attributes he sees in Uber – being a well-run, high-growth, and increasingly cash-generative platform business – is "extremely rare," particularly for a company of Uber's significant scale. While acknowledging risks like macroeconomic conditions and regulatory uncertainty, the core of his valuation thesis is based on the belief that the market is underappreciating the scale, profitability trajectory, and strategic positioning Uber has achieved.
Potential Risks with Uber
Bill Ackman presents a strong bullish case for Uber, but there are several risks that could impact its future, including macroeconomic factors like a potential slowdown in mobility demand and regulatory concerns, particularly regarding gig worker classifications. The most significant long-term risk, however, revolves around the development of autonomous vehicles (AVs). While Ackman sees AVs as a potential catalyst for Uber, the opposing view views them as an existential threat to Uber’s core business model. If AVs become mainstream, human drivers could become obsolete, and companies like Tesla or Google (Waymo) could launch their own ride-hailing platforms, bypassing Uber and offering rides at a lower cost.
The fear is that Uber could become a commoditized middleman, struggling to maintain its 20-30% take rate as powerful AV manufacturers take over the market. Uber's long-term success will depend on how well it adapts to this potential AV-dominated future.
So why did Bill Ackman sell his stake in Nike?
Bill Ackman explained his decision to sell, citing three major missteps by Nike: a shift to a direct-to-consumer strategy at the cost of wholesale partnerships, a merchandising structure that neglected sports, and an overproduction of best-selling franchises instead of focusing on innovation.
However, rather than abandoning his position completely, Ackman took a strategic approach by converting his equity holdings into deep-in-the-money call options, ensuring that Pershing Square would still benefit from any upside potential in Nike without bearing the full downside risk. These options allow Pershing Square to buy Nike at a set price over a long period, offering exposure while minimizing risk.
This strategic shift allowed him to lock in profits from his initial investment while maintaining the opportunity to capitalize on any future growth.
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