UBER: Definition
uber – prefix
- Being a superlative example of its kind or class (super – ubernerd)
- To an extreme or excessive degree (super – ubercool)
- An extraordinarily over-hyped business, designed to separate fools from their money (super – uberbubble)
As I write markets are looking pretty wobbly, although I’m not calling call a top of the market, because of there may be months/years left in the current momentum run, or just days, but the projected valuations, of the soon to be floated (possibly) UBER taxi app service, combined with it’s oh-so-humble name just cry out to be the apogee of our current departure from rational analysis.
Now I can only doff my cap in admiration at a company that has gone from a start up in 2009, not the happiest of times economically, to having, if not a global presence, then at least global notoriety; however the latest projected valuations throw into sharp relief just how overblown TechBoom (V2) has got..
The valuation?….Sorry I was forgetting. It is estimated to be $40bn.
Yes $40bn for a company that is busy having its services banned in economies all over the world. Well that’s all right then.
To be fair, despite a couple of significant own goals (showing a misogynist streak that regrettably seems to accompany ubernerdism ) they have some spectacular PR with one or two magazines in particular writing gushing pieces (Google will soon find them), quoting stories about getting the inside track on their growth rates from their ever smiling (well you would too) CEO Travis Kalanik. These articles point to ever higher take up and revenue rates that have simply gone parabolic over the last few years but provide little in the way of substance.
So let’s look at what is available, most interestingly a leaked screen shot revealed twelve months ago (the veracity of which the company did not deny, saying they would prosecute whoever leaked the document, although this hasn’t happened… so it could all have been a plant…but let’s for the sake of amusement take it as real) which indicated taxi serices using the app were generating up to $21m per week at the end of 2013, so extrapolated out (and ignoring their revenues fell dramatically over thanksgiving..so assume the same at Christmas, New Year and Easter) that would have been $1.1bn in fares, of which they take 20%, so assume a top line revenue steam of $220m.
So let’s bullishly assume they have doubled that over the last twelve months and so now have a top-line (remember this is TOP LINE REVENUE..not profit) of $440m, which with a $40bn value would put them on a Price/Revenue Ratio of 91 (BMW trades on a PRR of about 0.75…or 121 times less than UBER, and is reckoned to have one of the most valuable brands in the world). And remember this is a bullish interpretation of material that may be a plant.
As for Price Earning Ratio (PER), who knows, there simply isn’t information available.
And in the meantime the Taxi industry is closing ranks (no pun intended), governments are banning the service for a multiplicity of reasons, while stories of assaults resulting from the “car sharing” ability of the app are turning many potential users off the concept.
Finally it seems clear that smart-phone meters are becoming more commonplace in taxis, which makes sense, however it also is the biggest weakness of UBER. A Tech Fund manager recently enthused to us about how good this company was, as it had all the network connections and it will therefore dominate and its revenues will go up ever more…….errrr…sorry, have you been paying attention to the concept of capitalism?
The infrastructure is mobile networks and smart phone apps, the idea is now public knowledge and if there is profit to be made, if UBER is taking too much, others will step in with other, possibly local alternatives.
One of the great weaknesses of the whole 99/2000 Tech Boom (V1) was that it forgot that one of the beauty’s of the new technology was that it was all about fast agile companies growing rapidly as tech broke down barriers. This meant start-ups could compete with global behemoths, but it also meant the reverse could happen, or simply that newer start ups could easily unseat the hero of last week. That hasn’t changed, anything but, and while some services, such as Facebook and Twitter have developed massive global reach, monetising that is always going to be difficult as most users are, by definition, tech savvy and can jump ship very easily if it is a fashionable, or cheaper, thing to do.
Finally STA Wealth, based in Houston, Texas (the home of much high level independent thinking in the US) have finished analysing the US third quarter results season and below is their chart on the difference in top and bottom line corporate earnings since the bottom of the bear market. The narrative of earnings manipulation as opposed to real business growth remains as compelling as ever:
(Source: STA Wealth,) Click/Tap to enlarge
As for China and it’s recent volatility, well that is another story from the uberbubble files.