Affluent investor Bill Ackman recently acquired 30.3 million shares of this swiftly ascending growth company.
Due to his storied history, retail investors often pay close attention to Bill Ackman's moves. This iconic hedge fund manager headed Pershing Square Capital Management, which held $12.6 billion in assets as of December 31, 2024.
Ackman is renowned for his concentration portfolio filled with high-quality businesses. This year alone, his firm has scooped up more than 30 million shares of a promising growth stock. Let's delve into this exciting company to determine if it's worth considering for your individual portfolio.
Winning Ackman's Attention
As of publishing (Feb 21), Pershing Square own 30.3 million shares of Uber (UBER 1.23%), equating to a $2.4 billion stake. Ackman has been a regular Uber user, praising CEO Dara Khosrowshahi for turning it into a lucrative growth enterprise. He even went as far as proclaiming it as one of the "highest quality businesses" in the world via X.
Such positive accolades do wonders for Uber's reputation. Investors should thoroughly explore the factors underlying Ackman's optimism.
Perhaps the most significant factor is his belief in rapidly increasing Earnings Per Share (EPS) towards the future. He forecasts revenue growth in the mid- to high-teens due to increasing user base and customer spending. Lower operating costs should shore up the bottom line further. This fueled Ackman's anticipation of over 30% annual EPS growth in the coming years, leading to substantial free cash flow generation.
Powerful Two-Sided Platform
Ackman also underscored Uber's network effect, a vital asset to its industry-leading position. This network effect makes Uber's competitive advantage, or moat, tough to surpass, keeping competitors at bay.
At year-end 2024, Uber boasted 170 million active users and 8 million drivers across 70 countries. Uber’s ability to cater to rider demand while ensuring adequate driver capacity relies on its growing network of users. A larger user base means reduced wait times and prices for riders, while drivers benefit from more customers and opportunities to earn.
Attractive Valuation
Uber’s alluring business fundamentals piqued Ackman's interest, but its compelling valuation truly sealed the deal. In the past 12 months, Uber shares upped by mere 3% (as of Feb 21), yet analyst consensus EPS estimations for 2025 climbed a substantial 21%.
While autonomous vehicle (AV) technology may potentially disrupt Uber's business, Ackman and his team claim that AVs remain a distant reality. Safety, technical issues, infrastructure challenges, and regulatory hurdles pose significant obstacles that likely won't be cleared for years to come.
Furthermore, AV tech manufacturers may opt for partnerships with Uber rather than constructing new ride-hailing infrastructures. Given Uber's direct relationship with customers, it's more likely to serve as a partner for AV companies instead of competing against them.
In conclusion, Uber's equation of profitable growth, strategic partnerships, and competitive advantage hits a bullish note that likely resonates with investors who agree with Ackman. If you're in that camp, consider adding Uber shares to your portfolio.
- Ackman's focus on investing in high-quality businesses led his firm to acquire more than 30 million shares of a promising growth stock, which has seen significant potential efficiencies.
- In line with Ackman's belief in the company's future Earnings Per Share (EPS) growth, investors should examine the factors contributing to the firm's anticipated revenue growth and lower operating costs.
- Pershing Square Capital Management, under Ackman's leadership, has a substantial stake worth $2.4 billion in Uber, a company he praises for its impressive network effect and attractive valuation.
- Despite the potential disruption from autonomous vehicle technology, industry experts like Ackman believe that Uber's strategic partnerships and competitive advantage will enable it to navigate the challenges and maintain its position in the market.