But as easy as it would be to embrace popular wisdom and be bearish on Uber, it's worth remembering how fashionable it once was to be negative on some now widely-praised tech giants -- at times where their shares traded at a small fraction of their current levels.
Facebook (FB) is a very good example. After going public in May 2012 at $38, Mark Zuckerberg's firm lost more than half its value in the following months, as markets fretted about how well the company would be able to monetize mobile activity. It was around that time that Barron's (in)famously published a cover story declaring that Facebook's stock is only worth $15.
Alibaba (BABA) is another case in point. The Chinese e-commerce giant went public in September 2014 at $68 and surged above $100 that fall, but then gave back its gains and was trading below its IPO price as of September 2015. It was around then that shares added to their losses thanks to a Barron's piece arguing that Alibaba could fall another 50% (since then, it's up about 200%).
To some extent, Microsoft (MSFT) in early 2014 also qualifies as an example. Back then, as the software giant traded in the $30s, investors were upset about the company's (admittedly awful) deal to buy Nokia's phone unit, generally felt that its Office franchise would see little or no growth and were often lukewarm about the appointment of Satya Nadella as CEO. Though Nadella was respected as a product exec, many were disappointed that Microsoft didn't name (F) Ford chief Alan Mulally its CEO, believing that Mulally was more likely to drive EPS growth via job cuts, asset sales and large stock buybacks.
And if one wants to go farther back in time, there's the case of Amazon.com (AMZN) . Though it's hard to imagine at a time when the company is worth nearly $900 billion and widely cited in business school case studies, it was quite fashionable among value investors in the early-to-mid 2000s to trash Amazon -- then trading comfortably below $50 -- and predict it would go bankrupt. In those days, it wasn't hard to find shorts referring to Jeff Bezos as "Jeff Bozos," or declaring that Amazon should change its name to Amazon.org, the joke being that's it a non-profit company.
The point here isn't to argue that an investment in Uber today is guaranteed to pay off in a manner similar to an investment in Facebook in 2012 or Microsoft in 2014 (never mind Amazon in 2003). It is, however, to note that truly massive returns in big-name tech companies are typically achieved by jumping in at times when popular sentiment towards the company is far from positive, and major questions are being raised in some circles about its long-term prospects.
Certainly, if Uber, whose market cap currently stands around $50 billion, is going to deliver outsized returns over the next several years, it will have to put to rest a slew of legitimate concerns that investors currently have. Worries about its massive losses, which partly stem from shaky financial execution and a brutally competitive near-term environment for the Uber Eats food delivery business, are at the top of the list here.
But there are also other concerns, such as share losses to Lyft (LYFT) in the U.S. and Chinese ride-hailing leader Didi in Latin America, as well as the potential impact of brain drain and (per reports) weakened employee morale.
On the flip side, there are also some clear long-term positives to Uber's story that are bound to get more attention if its financial performance improves -- the company is aiming for positive 2021 EBITDA -- and Uber Eats becomes less of a drag on its bottom line. Among these positives: A giant ride-sharing addressable market; duopoly positions (and the long-term pricing power that comes with them) in the U.S. and other key markets; unmatched scale among ride-sharing players; and the ability in certain markets to offer both a ride-sharing service and a food-delivery service that can be integrated via offerings such as loyalty programs and subscription plans.
I was negative on Uber at the time of its IPO due to some of its aforementioned issues. And while I wasn't a fan of Lyft at IPO time either, Lyft's post-IPO earnings reports have looked better than Uber's, with the company adding to its U.S. share gains and showing more progress towards eliminating its losses.
As a result, even with Uber's stock now below $30, I think there's a good case for waiting until the company shows more substantial progress towards strengthening its bottom line in general, and reducing Uber Eats' losses in particular, before turning bullish. But at the same time, a trip down memory lane shows why being reflexively bearish about a company like this at a time when its stock has already fallen sharply could backfire over the long run.