tag:blogger.com,1999:blog-8152901575140311047.post8335472796086005815..comments2024-03-27T09:01:53.517-04:00Comments on Musings on Markets: The Ride Sharing Business: Is a Bar Mitzvah moment approaching?Aswath Damodaranhttp://www.blogger.com/profile/12021594649672906878noreply@blogger.comBlogger19125tag:blogger.com,1999:blog-8152901575140311047.post-63271983263036531402016-08-26T14:57:54.538-04:002016-08-26T14:57:54.538-04:00New numbers came out on UBER. They were considera...New numbers came out on UBER. They were considerable larger than this blog guessed at. Yesterday Reuter said Revenue for the current calendar 6 months was 2.306B and Operating loss of 1.270B.<br /><br />Author's Base year(column C).xls has Revenue at 2.168B for 12 months, and Operating loss at 500M.<br /><br />So my updated guess the Base Year might read: Revenue at 4.2B for 12 months with an Operating loss of 2.4B. Snap1529https://www.blogger.com/profile/06321477693503751897noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-91706626148325750992016-08-26T12:29:14.583-04:002016-08-26T12:29:14.583-04:00I am glad to see a professional evaluate Uber and ...I am glad to see a professional evaluate Uber and other Ride Hailing(If one entity charges a fee for service, they are not sharing, whether they do it part or full time) <br />I have many questions. <br />Does the fact Uber pays no taxes in many of the non US countries have an effect on the valuation? <br />In Canada transactions are immediately transferred to the Netherlands to shell companies. and disappear. Unfortunately it is legal in Canada? <br />Would agreeing to real criminal background checks somehow hurt the valuation? <br /><br />As Uber has been caught in many lies, and is sued regularly. do those that invest ignore the companies' ethics and how it may affect its ability to make profit? Or is are those though of accepted business practises, though uber has been involved in more than usual? <br /><br />Thank you, hope you continue to write on the subject, <br />All the best <br />Barry Wilson Anonymoushttps://www.blogger.com/profile/00770154796843601000noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-51173806761916019962016-08-22T15:08:52.970-04:002016-08-22T15:08:52.970-04:00James and Mike,
Thank you. I think it is fixed now...James and Mike,<br />Thank you. I think it is fixed now. <br /><br />Anonymous,<br />I think that the business is still fundamentally unstable all over the world. That is why I think that the peace treaty is only the first phase of a larger battle. Uber has opened the second phase with its investment in self-driving cars in Pittsburgh and I have a feeling that both Didi and Uber are going to use their access to capital to try to introduce barriers to entry in this business (more capital intensity, for instance) to put their smaller competitors at a disadvantage. The question is whether they can compete against Google, Apple and Volkswagen in a capital-intensive, technology-driven business.Aswath Damodaranhttps://www.blogger.com/profile/12021594649672906878noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-1928329928447102582016-08-22T15:03:44.779-04:002016-08-22T15:03:44.779-04:00Hi Professor Damodaran,
Quick question for you - ...Hi Professor Damodaran,<br /><br />Quick question for you - in the competition paragraph you say that "Second, its peace treaty with Didi Chuxing puts the smaller players at risk. Lyft, Ola and Grabtaxi, all companies that Didi invested in to stop the Uber juggernaut, may now be left exposed to competition" but wouldn't this decrease competition for the other Chinese competitors like UCAR now that the new regulations in China don't allow for pricing below costs and given Didi/Uber will control >90% of the market Didi/Uber will focus on profitability over market share? Would love to hear your thoughts on whether or not you think Chinese competitors like UCAR (or the other Chinese rideshare competitors) will be able to compete effectively vs. Uber/Didi in China or will eventually go bankrupt. Thank you for your time!Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-32881794123300960582016-08-22T14:17:22.878-04:002016-08-22T14:17:22.878-04:00Professor,
Looking into what Mike mentioned... On...Professor,<br /><br />Looking into what Mike mentioned... On the input sheet, cell D11's label should read "B4. Double market size" rather than the "B4: Double market it currently reads. Using a colon instead of a period here mixes up the vlookup in cell B9 and results in a 7.26% market growth rate flowing through the model (yielding a valuation of ~$24bn) instead of your published valuation of ~$28bn (which is indeed based off of the 10.39% market growth rate).<br /><br />Doesn't seem to result in any impact to your published valuation, just the default template layout.Jamesnoreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-58919618757236289862016-08-22T11:54:40.610-04:002016-08-22T11:54:40.610-04:00Mike,
What growth rate says 10%? Can you give me a...Mike,<br />What growth rate says 10%? Can you give me a cell reference?<br /><br />Hari,<br />You may be right but even if the end game is self-driven cars, why would any of the existing players have an advantage in that game (which will be capital intensive, tech-driven games where the auto and the tech companies will have the advantage over the Ubers and Didis of the world?Aswath Damodaranhttps://www.blogger.com/profile/12021594649672906878noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-87762564654293137882016-08-22T11:37:57.982-04:002016-08-22T11:37:57.982-04:00I think there may be a bust in the model. The grow...I think there may be a bust in the model. The growth rate says 10% but the inputs tab is pulling 7%? Thus depressing the valuation. Lmk if I am incorrect?Mikenoreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-17794515886119803542016-08-22T11:03:53.049-04:002016-08-22T11:03:53.049-04:00I don't think people are valuing these compani...I don't think people are valuing these companies on their current business. The endgame seems to be a fully automated transportation network. Such a thing might even displace personal car ownership and public transit.<br /><br />I think people view that outcome as winner-takes-all because larger networks will receive better economies of scale and be more likely to have cars immediately available upon request.<br /><br />They are willing to burn huge amounts of cash to own the market. Ride-sharing may not be currently profitable, but once (or if) technology catches up, market-share in this space will become incredibly valuable.<br /><br />Obviously this game becomes extremely dangerous if self-driving cars do not materialize on time.Ryanhttps://www.blogger.com/profile/04314718042663866972noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-8244927487600535632016-08-18T23:51:06.140-04:002016-08-18T23:51:06.140-04:00Professor Damodaran,
Thanks for your detailed pos...Professor Damodaran,<br /><br />Thanks for your detailed post on Uber's valuation.<br />In your post you mentioned that Uber has no no moats to defend, meaning no competitive advantage. Isn't that the case with other e-commerce companies or companies with marketplace models? What competitive advantage do companies such as Flipkart, Snapdeal or even Amazon's e-commerce business have to boast of such huge valuations? I agree that these companies can get funds / capital to take care of their expenses/burn-rate for a much longer time frame, thereby giving a higher probability of success. But, aren't these business models flawed as well?<br /><br />If you have done a valuation of Amazon or any other such companies could you please provide the link?Harihttps://www.blogger.com/profile/07973740644502744864noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-37170041728198893372016-08-18T17:42:37.031-04:002016-08-18T17:42:37.031-04:00Cashmoneyfman,
I saw the Pittsburgh news story as ...Cashmoneyfman,<br />I saw the Pittsburgh news story as well and it is interesting because its effect on value is mixed. It is true that you get to keep all of the revenues now (and don't have to share with the driver) but this is a capital intensive model where you have to invest massive amounts in cars to produce rides on the scale that I have estimated. It may be the ride sharing game of the future but if so, does Uber have a competitive advantage against Apple, Google or even Tesla that have the technological edge as well as far more capital than Uber does?Aswath Damodaranhttps://www.blogger.com/profile/12021594649672906878noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-85809058826689003462016-08-18T15:54:04.845-04:002016-08-18T15:54:04.845-04:00Professor Damodoran -
Very interesting point but...Professor Damodoran - <br /><br />Very interesting point but think your valuation misses one massive detail - the take rate! Self-driving cars mean take rates at 15% are way too conservative, since they will not have to pay any commission to drivers.<br /><br />Already they have 100 cars ready to go in Pittsburgh for "drivers" who will probably be paid $10 an hour. That means the take rate is only going up. Doubling the take rate to 15% means double your terminal value, which is over 100% of your valuation.cashmoneyfmanhttps://www.blogger.com/profile/14883352628424585064noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-5453656036497580812016-08-18T14:10:39.527-04:002016-08-18T14:10:39.527-04:00Typo? Didi Chuang = Didi Chuxing?Typo? Didi Chuang = Didi Chuxing?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-33513455697501372992016-08-18T09:47:51.763-04:002016-08-18T09:47:51.763-04:00I don't understand why they keep calling it ri...I don't understand why they keep calling it rideshare, it is a taxi service that has been able to grow due to technology allowing riders to connect with drivers, very few drivers 'share' their car but rather this is their full time job, prior to that they were driving for a cab service or doing something else. At least in the US cities I have been in and in conversations with drivers. So just like taxis they should be regulated and pay taxes just like yellow cabs (in NYC) are, otherwise they are not competing on a level field. <br /><br />This is the same issue with Uber.AJacksonnoreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-85204041583879722022016-08-18T05:13:26.451-04:002016-08-18T05:13:26.451-04:00Hi professor,
I think the deal with Didi gave Ube...Hi professor,<br /><br />I think the deal with Didi gave Uber China a 20% stake in the combined entity. Uber China is owned by Uber, Baidu and other investors. I think Uber Inc owns approximately 30% of Uber China, so the actual stake in the Didi/Uber China combination is closer to 6%, instead of the 20% you take into account in your model.<br /><br />Otherwise, love the posts and keep them coming!<br /><br />kind regards<br />JackAnonymoushttps://www.blogger.com/profile/04025351481314693874noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-73865752579422902652016-08-18T03:14:10.218-04:002016-08-18T03:14:10.218-04:00Lol http://abovethecrowd.com/2014/07/11/how-to-mis...Lol http://abovethecrowd.com/2014/07/11/how-to-miss-by-a-mile-an-alternative-look-at-ubers-potential-market-size/Was wrong againhttps://www.blogger.com/profile/14395028884725427353noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-27552983854660024242016-08-18T03:12:35.017-04:002016-08-18T03:12:35.017-04:00Check this out. http://abovethecrowd.com/2014/07/1...Check this out. http://abovethecrowd.com/2014/07/11/how-to-miss-by-a-mile-an-alternative-look-at-ubers-potential-market-size/Was wrong againhttps://www.blogger.com/profile/14395028884725427353noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-81326266522878112042016-08-17T16:47:02.239-04:002016-08-17T16:47:02.239-04:00Given the focus on automated ride sharing the capi...Given the focus on automated ride sharing the capital intensity of the business is likely to actually rise dramatically over the next decade as they need to build out their own fleet or compete against manufacturers and their automated fleets.<br /><br />It should be noted that manufacturers like Tesla soon (or the likes of Toyota a few years down the line) would have incentive to offer their car "spare capacity" ride sharing network at cost as they making money elsewhere, much as Google offers services for free and makes money on their core ad network.<br /><br />The value of the ride sharing network is high due to increased availability before automated fleets become a reality, but as you note switching costs are still pretty low, making long-term sustainable margins questionable.<br /><br />Finally I should note that driver economics in several states, such as Detroit, have already reached the level whereby mileage revenue has dropped below government estimates for mileage costs (54c/mile). This means that, especially given the onerous, sometimes subprime leasing terms of the cars, some drivers are working for free or near free already, with most of their pay basically coming from deferred car depreciation.<br /><br />Dicey, but good that Uber got out of Chinese stitch up.Emad Mostaquenoreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-3821119156538095312016-08-17T14:45:53.946-04:002016-08-17T14:45:53.946-04:00front page bloomberg!
front page bloomberg!<br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-10976494632758826722016-08-17T13:51:26.792-04:002016-08-17T13:51:26.792-04:00I certainly agree with your story surrounding, com...I certainly agree with your story surrounding, competitors and lack profit. I would also had ligation risk seems to be very high in my mind. I don't believe the cab companies will go quietly. It doesn't have to be an Austin scenario, but even some type of tax just to support NYC medallion values. <br /><br />Do you think these companies could become case studies in private investors waiting too long to reach public markets and cash out or are these ride sharing companies never really in position to go public?Eversarhttps://www.blogger.com/profile/01730710308867595430noreply@blogger.com