The CHEAPEST Quality Stock In The Stock Market!

[00:00:00]The cheapest quality stock in the stock market. I get asked all the time, what do you think is the best stock to buy or your favorite stock or some kind of stock that's really, really cheap? And it's hard for me to choose between a lot of them because there are so many opportunities in this market. But in terms of the stock that's a high-quality company and it's trading at the lowest multiple on a price to free cash flow basis, for me personally, it's Uber.

[00:00:26]Uber stock is down 21% over the last year. The stock right now is trading at about 12 times free cash flow. This is a company that's growing free cash flow 20% plus. It will likely keep growing free cash flow 20% plus and it's trading at about 12 times free cash flow. I got so many comments asking me to talk about this one since I haven't talked about it in a while. So, this is what I'm going to do in today's video and I really hope you enjoy it as always. Now, Uber is going down mainly due to the disruption fears from Tesla and Waymo. And this is what Bill Ackman said, which he's a shareholder. He said, "The street has Uber priced for Tesla robo-taxi disruption." He said that the fear is flat wrong and he continues to hold his Uber position. Now, the way Uber was doing it initially is they were partnering with companies like Waymo where Waymo of Google owns the fleet and they own all these things.

[00:01:26]Uber uh manages the fleet for them. So, they have to charge the cars, they have to clean them, maintain them. Uber has fleet managers and those fleet managers were managing the Waymo cars and those Waymo cars were exclusively on the Uber app because Uber app has the traffic, has the people, has everything you want.

[00:01:45]So, it's a good app in general to launch a vehicle or launch anything in a new market. And this is how Uber was approaching it. But then Waymo started to to in different regions using their own app without directly partnering with Uber. And Uber was thinking that maybe over the long term, once Waymo scales and other companies scales, they're going to move onto their own app, and Uber will be left for nothing. So, Uber decided to take control of their operations, and they started doing equity stakes in Lucid, some deals with Mercedes, Rivian, Nissan, Stellantis, and Volkswagen, and other kind of companies. And those deals largely include Uber owning a piece of this fleet, which gives them much more control where you're not dependent on Waymo, and Waymo can decide to drop you anytime and go on the Waymo app, which is becoming more popular. This way, Uber has much more control over the fleet, and that's a much better way of doing it, in my opinion. It's more capital-incentive, but but at least they do have more control than they had before. But they still have the fleet manager business where if you have any other company, like May Mobility, for example, Uber manages the fleet for May Mobility or AV Ride and all those companies. And you know, in terms of cleaning them, maintaining them, charging them, a lot of companies don't want to deal with that, and Uber has the fleet managers that do it for them. And that's really good for the company, and this is how they've been approaching it.

[00:03:17]Now, in terms of disruption from Tesla and Waymo, I personally believe it's real, but I believe a lot of it is priced in evaluation. I think Uber has yet to see some major signs of disruptions yet in their income statement. Although the last quarter was a little bit weak for the company, they grew 10% in revenue on a constant currency basis. The quarter before that was 19% in revenues for a year-on-year, it was about 17%. So, this is a massive deceleration to only 10% revenue growth.

[00:03:54]That's really not good at all. I personally don't think it's coming from all the autonomous vehicles cuz I don't think we have enough of them yet out there for them to cause major disruptions for Uber. But Uber, for example, its earnings per share has been growing like crazy, about 44% year-on-year cuz the company keeps on improving pricing, it keeps on improving the efficiency of its operations in general. So, that's really helping them and they're growing profits much faster than they're growing their revenues.

[00:04:25]Now, the delivery business of Uber is by far the best business to own against the disruption of robo-taxis and autonomous vehicles in general cuz autonomous vehicle like a Tesla robo-taxi or Waymo, the car can't go in in your hotel room to the 100th floor or 15th floor and deliver the food to your door. They just can't do that yet.

[00:04:48]Maybe in the future if they have a humanoid sitting inside the robo-taxi and the humanoid walks in and delivers the food or whatever. But in most cases, if you live in an apartment, you live somewhere, I mean, it's you can't really deliver them to your door. The the taxi can't do that. So, I think that's really a a good one in my opinion where, you know, it has much better chance of not being disrupted from those robo-taxis and it's seeing massive growth, about 26% in booking versus 18% revenues growing 28% versus 22%. So, the delivery business is doing a lot of the lifting for Uber and it's been, you know, holding up really well for the company.

[00:05:27]And they [snorts] decided to expand it further with the acquisition of Delivery Hero. Delivery Hero is a major platform, especially in Europe. They have 49 million monthly active users and they helped expand the market for Uber from 79 country to about 100 countries and they're now in a lot of countries and mainly Brazil and other places where they weren't really present before and that's you know really going to help them expand in general and I think it was a very good deal in my opinion. It's mostly that they're not using shares, mostly that and internal cash generation which is really good for shareholders better than you know doing just buybacks or sitting on the balance sheet but in terms of the price, I think the price was a little bit too high. Like they said it will be a creative output clause which is good but they said high single digit percentage accretion by year three. So it's going to take three years to see only high single digit of accretion per share.

[00:06:27]That's not good to me. So I think you know they kind of overpaid a little bit for the acquisition. I would not say it's a bargain. I would not say it's a steal. I think they paid paid much more than a fair value. So they overpaid a little bit but in general, I think it was a good acquisition. And it's going to help them expand in those markets and it's going to you know it's better to do it now before Uber gets bigger and bigger and then you have all the antitrust lawsuits and antitrust stuff.

[00:06:55]You can't do it anymore. So I think it was a good use of shareholders capital and and I'm not really against it in general. Together they're going to make about a hundred billion dollars in revenues by 2028. So this is going to boost Uber's growth in a major major way without diluting stock in a major way which is again pretty amazing from the company. The company has been buying back a lot of stock. I don't think they will be buying back after today because of the acquisitions. They're going to be focused on paying down a lot of debt. So I think and that's I think that's better than buying back stock to be honest. Now in terms of the valuation again, the stock is very cheap guys. Like it's not just what we buy in the market but it's how much we're paying. Uber at 12 times cash flow like Bill Ackman is saying. I mean, it's really priced for the worst-case scenario. Like the stock used to trade in the 30s, 30 times cash flow, 19, 20. Now you could buy it for about 12 times cash flow. Even if we have Tesla and Waymo and all of them, I think Uber will still exist, especially Uber's delivery business. A lot of companies, like WeRide and others, they want to partner up with Uber, especially outside the United States. Tesla does not have much of a competitive advantage outside the United States. There's a lot of Chinese cars, a lot of other cars, and a lot of those companies prefer to partner with Uber over having their own app and managing their own fleet and doing all these things. And the delivery business is not going away anytime soon. Maybe the drones can deliver or maybe the taxis can deliver, but in terms of delivering things to your door and in the comfort of your house, that's not going to happen. And even maybe groceries and other things which a lot of people use Uber for, that's not going to happen anytime soon. You still need humans for that. And this is by far the fastest growing business of Uber. I think it's going to be here for many years to come. So I think the stock is by far the cheapest quality stock by metrics at about 12 times cash flow, growing cash flow about 18% expected next year and 14% year after. I mean, no matter how I look at it, I think the stock is undervalued. I've been selling the $60 put options on the stock, January 2027, $60 put options, and I've been collecting premium on it, and it's been profitable so far. And I really like it, and I think it's undervalued.

[00:09:13]And that's my opinion on Uber. Hope you enjoyed it. It was not financial advice.

[00:09:18]If you did enjoy it, please press the like button, and maybe consider subscribing. So I'll talk to you in another video.