Uber IPO: Could This Stock Be the Next Amazon.com, Inc. (NASDAQ:AMZN)?
Ahead of Uber’s initial public offering (IPO), many have criticized the company because of its allegedly unfair practices that hurt licensed taxi drivers. Yet the market does not care and prefers the deregulation of what has typically been a government-controlled industry.
It comes as no surprise that Uber is the most valuable startup in the world, worth as much as $52.0 billion. This year it saw $10.84 billion in bookings, which should allow for revenues of over $2.0 billion—much higher than the $470 million predicted by Bloomberg last June.
The figures are even more startling for 2016 with potential bookings of $26.0 billion and revenues of over $5.0 billion according to a presentation for potential investors cited by Reuters last week ahead of the Uber IPO within the next 12-18 months.
Could Uber Be the Next Amazon.com?
Uber, which now operates in over 250 cities worldwide, has therefore overcome obstacles and criticisms, generating an impressive growth rate with no signs of slowing down. The vehicle for hire service (VFH) keeps a 20% commission on all fares, whether the drivers are professional or amateur, operating their own vehicles or taxis (in some cities).
Uber’s rise has been remarkable. Its estimated revenues are almost more than three times higher than in 2014, when the company registered $2.91 billion in bookings and over ten times 2013 bookings, totaling less than $700 million.
The strong booking numbers mask the fact that Uber remains unprofitable for the time being. The company, which has tended to be mute about its finances, is still running a deficit despite its extremely light business model. This is because Uber is re-investing heavily in itself to expand beyond the 50 countries where it currently operates. More importantly, for the long term, it is also investing to replace drivers with robots.
Even as Tesla Motors, Inc. (NASDAQ:TSLA) is ready to offer a driverless car, Uber has also established its own research and development center, recruiting some of the best engineers in the world to develop completely autonomous vehicles that can pick up a customer and deliver them to any destination, without having to repay commissions to humans.
The robotized cars will also decrease Uber’s risk profile, because it is unlikely that the driverless cars will have a criminal record jeopardize the company’s reputation. This has been the case in the United States where Uber was accused of having signed on former killers, rapists, or burglars as drivers. Uber’s ability to improve its image, conditioned by lawsuits and restrictions, must be achieved before it can launch an IPO.
The current litany of protests and legal challenges around the world could affect its IPO performance. Not surprisingly, Uber appears to be tackling the issue of security and the prospect of vehicular hacking—given the extensive amount of computer hardware and software needed to achieve human-free driving. Therefore, Uber has hired the two computer engineers who showed how easy it was to take control of a Jeep Cherokee, driving on the highway at 110 km/h, hacking into its software.
The two, Charlie Miller and Chris Valasek, will help the company’s Advanced Technologies Center, a research laboratory opened by Uber and Carnegie Mellon University last February to develop self-driving cars that are also secure from hacking interference.
In fact, Uber has been shopping around for talent from many former startups, including Facebook Inc. (NASDAQ:FB) and Google Inc. (NASDAQ:GOOG), taking on more than one hundred engineers. They are working on navigation, vehicle safety, and autonomy as well as software and hardware for the security system.
This Technology Stock Could Triple Investors’ Money
Uber’s current drivers can still rest, as the company’s quest for an autonomous car is at an early stage. But if Uber is betting heavily that a self-driven car will one day replace the hundreds of thousands of drivers it currently employs as contractors, investors can bet that the company is poised to become much bigger than Amazon.com, Inc. (NASDAQ:AMZN).
