Where Will Uber Stock Be in 5 Years?

Uber (NYSE: UBER) hasn't been the easiest business to own. Its shares have taken investors on a winding journey full of ups and downs. Despite heightened volatility, the stock has been a huge winner, soaring 193% in the past five years (as of April 2).

It can be disheartening if you missed the gains in the past. But with shares currently trading about 20% below their record high, there might still be an opportunity to take a ride. Where will this growth stock be in five years?

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Growth across the board

It's wild to think that Uber went from nothing to a $155 billion market cap company in 16 years. It takes tremendous growth for a business to expand this rapidly, which is exactly how to characterize Uber's story.

The business simply provided a much better experience than taxis offered. Layering on ongoing technological advancements, while entering new markets and introducing new features, resulted in monster success. Uber is essentially used as a verb these days, highlighting its consumer mindshare.

In the past five years, revenue jumped 212%, driven by a 150% increase in gross bookings. While growth over the next five years probably won't resemble the past, I think it's reasonable to assume that the top line can expand at a low-to-mid double-digit pace for the foreseeable future.

The leadership team sees massive potential with the Uber One subscription, which grew members 60% year over year in Q4. There's also a focus on affordability, with UberX Share hopefully bringing in more price-sensitive consumers.

Uncertainty around autonomous driving

The biggest risk facing Uber is the potential of autonomous vehicle (AV) technology. In this scenario, driverless cars would roam the streets, picking up passengers and taking them where they need to go. The cost would be substantially lower, as there would be no driver to pay.

But AV technology isn't remotely close to being broadly adopted by the masses. And Uber recognizes this potential. It made itself a partner of choice in the space. It works with Alphabet's Waymo to provide driverless rides in certain cities. Nvidia is another well-known partner.

The fact that Uber has a direct relationship with 171 million active users, with such strong mindshare and is habit-forming among consumers, is extremely valuable and puts the company in an advantageous position. Network effects support its competitive standing, with more drivers, riders, and restaurants increasing the value to all stakeholders over time.

Uber's underlying technology, particularly around dynamic pricing, fleet management, and matching ever-changing supply and demand, are core competencies that give it an edge. Tesla, a leading AV tech developer, wants to launch its own robotaxi service. However, it will take time to develop the skills Uber excels at, not to mention to bring trip costs down and ensure consumers feel safe in these cars.

While advancements in AV are hard to predict, based on the way things are trending, Uber looks to be handling this risk well. It's positioning itself for continued success.

Should you buy Uber stock?

Pershing Square Capital Management announced the purchase of 30 million Uber shares earlier this year. The hedge fund, run by billionaire Bill Ackman, believes Uber can achieve management's implied target of greater than 30% earnings-per-share growth over the next several years. The combination of strong revenue gains and operating leverage, as well as a powerful market position, give confidence that the outcome is achievable.

Even with the stock's fantastic performance since April 2020, it doesn't look expensive. It trades at just 22 times forward earnings. At this level, Uber looks like a worthwhile investment opportunity. I wouldn't be surprised if shares double by 2030, which would likely outperform the broader market.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Neil Patel and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Nvidia, Tesla, and Uber Technologies. The Motley Fool has a disclosure policy.