Uber is one of the biggest phenomena in the business world today. They launched well and grew faster than words can do justice. With so much current value, many traders are chomping at the bits for the company to go public.
On top of that, they have announced a major change with their recent shift towards self-driving cars. Let’s take a look at what that means for the company and whether or not you should ready to buy as soon as their IPO drops.
Current State
As of right now, Uber is valued at $68 billion. That makes it the most valuable private company and the most valuable startup in the world. There is no denying that the company has the largest share of the global ride-service market, but things have slowed down.
Part of that is the non-sustainability of such an explosive start, but the majority of Uber’s problems stem from regulation battles. A number of countries, states and cities have banned Uber entirely, although in many cases their main competitors are also not allowed to operate.
Some of the recent locations to slow expansion through regulation include the Netherlands, Thailand, India, China, Alaska and Austin. There are plenty of others, but these have been the highest profile cases.
One of the common recurring themes that seems to hinder Uber’s progress is regulation related to screening drivers. Many local governments want to handle screening, but Uber has a large international contract for screening that is often cheaper than what these governments offer.
The other major issue comes from battling unionized taxi workers. The unions are entrenched and use no small amount of their power to stay competitive.
There are almost countless other minor regulations that cause headaches, but these are the biggest issues the company has faced across the globe. In spite of it all, Uber is looking for their biggest revenue year yet, exceeding $2 billion so far.
Factoring Self-Driving Cars
To be clear, self-driving cars have not been cleared for use yet, but Uber has invested several hundred million dollars so far in acquiring the talent and production facilities necessary to push forward.
They have announced that they will start testing as soon as next year, putting them ahead of any official schedules provided by the other major players in self-driving vehicle production. This is equal parts exciting and scary for potential investors.
On the positive side, a successful self-driving fleet is an incredible step forward technologically, and being first will probably come with key patents and a chance to corner the market.
The vehicles may have a bigger impact on shipping than passenger transport, as machine-driven vehicles don’t require the same pay or rest as humans, enabling these fleets to deliver goods faster and at less cost.
The other big promise is in regards to regulations. Self-driving cars don’t need to be screened, so a large number of regional markets that are currently inaccessible to Uber become revenue generators.
On a negative side, the technology still needs a lot of work. Uber is hoping to have a self-driving fleet before 2020, but the challenge is potentially too great to achieve such a date.
Even if it isn’t, removing the human labor component from taxi services is sure to meet staunch resistance from unions. You can count on them to push as hard as they can for regulations that protect human jobs. Factoring both sides, you can still safely assume that an effective self-driving fleet will increase revenue by billions of dollars a year.
IPO
Uber is a private company that is not publicly traded on any market. That limits investors to the likes of venture capitalists, but that is expected to change, and soon.
Right now the company is receiving more investment dollars than revenue, so they can’t sustain the status quo. Experts unanimously agree that an IPO from Uber will be here by the end of 2016 at the earliest and the end of 2017 at the latest. So, if you are looking to get your piece, you won’t have to wait long.
Of course, the big question is whether or not you should invest. Gauging the long-term potential of such a young company, and such a new market, is all but impossible. Whether or not you should buy Uber at launch with the hope of owning the next Microsoft or Google is certainly a gamble.
Conversely, a company that is currently valued at $68 billion and rising, with such a commanding lead in their market is likely to have a very successful IPO. If you’re in it for the short game, it shouldn’t be difficult to buy up some Uber and turn a quick profit.
Regards,
Ethan Warrick
Editor
Wealth Authority
