tag:blogger.com,1999:blog-8152901575140311047.post8473912239389349188..comments2024-03-29T07:41:47.433-04:00Comments on Musings on Markets: Up, up and away! A crowd-valuation of Uber!Aswath Damodaranhttp://www.blogger.com/profile/12021594649672906878noreply@blogger.comBlogger18125tag:blogger.com,1999:blog-8152901575140311047.post-8580442946507518682016-11-29T10:29:06.659-05:002016-11-29T10:29:06.659-05:00Professor, I need to admit that your approach was ...Professor, I need to admit that your approach was that best so far I Studied and I really enjoy to watch your online's class.<br />I was working on your spreadsheet and looking at the data in terns of market size I think you should add market with the strongest growth from UEBER, such as São Paulo Brazil. Maybe I am not look at it in the most correct way, but just tough about it and want your review at it.<br />Anonymoushttps://www.blogger.com/profile/14935557354617930905noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-83499699615138432252015-07-04T05:42:14.076-04:002015-07-04T05:42:14.076-04:00I am a New York City fleet yellow taxi driver who&...I am a New York City fleet yellow taxi driver who's been following Uber for a while and blogging about it. <br /><br />I don't know if you know that Uber inflates and distorts its driver income numbers in order to recruit drivers who usually are not sophisticated. If you scope out Facebook and other platforms you'll find groups of Uber drivers who are awakened to the scam. They work at dissabusing potential driver recruits and sporadically organize strikes and demonstrations against Uber.<br /><br />Then you have legal challenges to the very core of their business model in the United States- the classification of Uber drivers as independent contractors. Super exploitation of desperate people is Uber's "secret sauce" and not any technological toys. There's a real possibility that this core asset that Uber has - super exploitation of desperate people trapped in subprime usurious car loans will come undone.<br /><br />There is also the admittedly long shot possibility that e hail driver apps themselves will be banned as the public safety threat that they are. As it stands New York City has taken steps to finally minimize the problem of app and telephone distracted driving. This is an implicit admission that the problem exits. I know of two lawsuits against Uber over this situation in New York alone.<br /><br />As a taxi driver I can report that it doesn't seem like Uber has hurt my income yet. There are fewer yellow taxis on the streets of the city but there's a whole armada of green taxis operating that are pretty new to the game.<br /><br />I would take any figure emanating from Uber with a giant grain of salt.<br /><br />By the way the recent leak that Uber has an operating deficit of $275 millions- do we even know if that number is reflecting losses for a year? A quarter? A month?<br />Anonymoushttps://www.blogger.com/profile/09952273816595239919noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-62853735884020551852015-05-02T02:47:06.654-04:002015-05-02T02:47:06.654-04:00Dear Professor,
I sympathize with your previous vi...Dear Professor,<br />I sympathize with your previous view on UBER's value and would like to thank you for sharing such interesting information. I wanted to point out some other difficulties that make it harder for UBER to expand globally. <br /><br />On your previous UBER post, you mentioned that Latin America was a market that could grow beyond averages because it is under served. Actually this is not the case, for example in Peru, you have a total of 240k taxis on the market while the optimal amount is around 100k so there is an over capacity of 140k (good source) (Here it is said that taxis are the insurance of the unemployed). The same scenario can be seen in neighboring countries, so rather than growing markets, they could be diminishing ones, due to overcapacity, alternative transportation development and higher accessibility to car purchases.<br /><br />But the biggest concern is competition. In South America the main taxi matchmaking company is EASYTAXI not UBER, they are quiet well positioned and it won’t be easy to take some of their share. I think the biggest reason that puts UBER on a disadvantage to other companies is that in order to ask for a cab you have to introduce your credit card data before. In some places, especially in underdeveloped countries, people prefer to pay in cash because of trust and technological issues. (This can be solved so it’s not very relevant). <br /><br />Competition is also worrying on the new markets under consideration. In Europe for example, there are already car sharing apps such as BlaBlacar, which is the market leader by a great extent. In car rental biz, you have companies such as Drivy in France and the list goes on...<br /><br />UBER is an amazing platform, the optionality to expand to other businesses is very wide, the market is big and growing, but despite all of it, the barriers to entry to these kinds of businesses are very low, this will eventually lead to a proliferation of competitors and margins will shrink. <br /><br />I think you made it very clear on your prior post that the company was overvalued, even considering very favorable assumptions. Once again, enthusiasm won over rationality. <br />Anonymoushttps://www.blogger.com/profile/05535758133392190408noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-9629149259210930292015-01-21T07:43:15.906-05:002015-01-21T07:43:15.906-05:00Hi Professor,
I think the food delivery market is ...Hi Professor,<br />I think the food delivery market is more reasonable to measure, therefore Just Eat (ticker: JE/:LN) is being negotiated ~3 times TPV, and Uber around 4 x TPV (in a much larger industry and with more cross selling opportunities).What are your thoughts about just eat valuation? Many thanks!FIPÃOhttps://www.blogger.com/profile/17863299989602287724noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-2079973685644224502015-01-05T14:38:55.435-05:002015-01-05T14:38:55.435-05:00Feel free to ignore, but suggest you change the &q...Feel free to ignore, but suggest you change the "Goal Seek" picture in the "ERPJan15" excel file as it took me a little bit to understand the source of the goal seek amount. Pretty sure it is the picture from January 2014. Otherwise, thank you for another great post. Colby's and Harlan's Dadhttps://www.blogger.com/profile/10412154509466793895noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-73358321347418501252014-12-23T14:57:30.444-05:002014-12-23T14:57:30.444-05:00I think in the future it would be very convenient ...I think in the future it would be very convenient to have a fleet of driver-less cars. I am not sure how Uber would factor into this...TimurIVhttps://www.blogger.com/profile/03764937004560901455noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-32333930754788649952014-12-19T06:17:14.909-05:002014-12-19T06:17:14.909-05:00Is the $100 Bn size of the taxi and limo market on...Is the $100 Bn size of the taxi and limo market only for US cities, or for the global market? <br />Any data on % revenue outside the US for Uber?Nainahttps://www.blogger.com/profile/05993340259452660631noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-58239323876351349572014-12-15T05:09:15.084-05:002014-12-15T05:09:15.084-05:00Hi professor,
Given that there is a big risk that...Hi professor,<br /><br />Given that there is a big risk that Uber may be banned in some countries, how do you factor that risk in your valuation analysis ?Yniimhttps://www.blogger.com/profile/01340385360653482731noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-22669865151071395342014-12-11T08:02:51.688-05:002014-12-11T08:02:51.688-05:00You can believe that Uber has lots of room to grow...You can believe that Uber has lots of room to grow and believe that it is over valued at $40 billion, at the same time. Aswath Damodaranhttps://www.blogger.com/profile/12021594649672906878noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-79221197786675406872014-12-11T00:34:32.953-05:002014-12-11T00:34:32.953-05:00I just caught a snippet of your comments re Uber t...I just caught a snippet of your comments re Uber tonight (Dec 10, 2014) on Nightly Business Report. Did you change your view re Uber as you said on the program that Uber still had a lot of room to grow? Or do you still think Uber's valuation is absolutely crazy? Thanks.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-51791696297540596202014-12-08T13:16:25.342-05:002014-12-08T13:16:25.342-05:00Hi Prof,
Though i am a software professional, i h...Hi Prof,<br /><br />Though i am a software professional, i have taken to Valuation and corporate finance as a hobby class after my 1 year exec education programme from IIM Bangalore in early 2013. I have been following your blogs since then and they are not just thoughts but classes in themselves. Thanks for such insightful articles.<br /><br />Having said this, i wanted to say that i not only acknowledge the market size that you have considered but i feel that it is still an optimistic figure. One important factor that everyone seems to be missing is the fact that governments especially in emerging markets are looking to provide highly safe and best in class public transportation to decongest the populated roads. Good quality Public transportation is in itself a competition to taxi services like Uber who thinks that networking effect will make people travel more in taxis. Metro in New Delhi has been a big hit and lot of people from lower to upper middle class prefers it more than taxis, not only for cost factor, but security, comfort and punctuality in reaching the destination. Nobody wants to get stuck up in clogged roads of heavily populated areas in Delhi or bangalore and alike cities. Most people take taxis only if they are in real hurry OR if they have to goto Airports or railway stations and for that mom n pop taxi stores are still a good bet.<br /><br />Moreover, the recent incident in Delhi and subsequent ban reinforces the fact that road for Uber in such countries where there are no security and identification f/ws in place is going to be ONLY hard and not easy. Uber cannot just claim to be a tech pltform BUT has to take ownership of driver profile verification PLUS a robust GPS system that does not just reply on PHONE and an installed APP.<br /><br />I have shifted base to US in VA in the month of April 2014 and hence could not test the service in India but based upon my discussions and thoughts in papers, I think the road ahead for Uber is just too difficult in a market like India not only due to security reasons BUT also a great competitor in the form of METRO which is expanding at a brisk pace in entire Delhi and nearby cities.<br /><br />What is your viewpoint on these thoughts ?Vikrant Mahajanhttps://www.blogger.com/profile/03692165298159503039noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-49432100879021524682014-12-03T15:40:20.789-05:002014-12-03T15:40:20.789-05:00Off topic, any ideas on the current state of US in...Off topic, any ideas on the current state of US independent oil and Gas companies. They been crushed lately, possible opportunities available?? Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-45149424305899517492014-12-03T13:40:53.135-05:002014-12-03T13:40:53.135-05:00Anonymous,
You are right. Narratives have to be ch...Anonymous,<br />You are right. Narratives have to be checked <br />(a) Against history: Has any company done what you are forecasting for your company before? If yes, how does your company measure up against that company? If no, what will make it the first?<br />(b) Against Economic first principles: If you are providing a high margin/high revenue growth narrative, how do you reconcile with the fact that higher prices usually translate into lost revenues?<br />(c) For consistency: Are your assumptions about risk, growth and cash flows internally consistent? In other words, are you assuming high growth with low/no reinvestment and low risk (which would be inconsistent)?<br />I will work on a post specifically on this issue or weave into a different valuation. Aswath Damodaranhttps://www.blogger.com/profile/12021594649672906878noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-36765064030187416322014-12-03T13:36:56.320-05:002014-12-03T13:36:56.320-05:00Tom,
On the market size, I take what I can get and...Tom,<br />On the market size, I take what I can get and it often means going to many sources. Here are some that I find useful:<br />1. Industry trade groups: Almost every business has a trade group that reports aggregate statistics. For instance, to get the data on the size of the moving services business, I went to to the American Moving & Storage Association (AMSA) website and they do an annual update of the details of their business.<br />2. Business forecasting services: There are services that estimate the business size and provide forecasts for the future. Here is one of my favorites (IBISWorld) and it provides details on a vast array of businesses. Two problems. First, he data is often better for the US than global. Second, most of these services require payments (and some are pretty significant). So, I take what I can get at low or no cost. I also try to find multiple sources of data so that I can crosscheck the data. (That requires a couple of hours of focused Google search).<br />3. Company level data: I have access to Capital IQ which has data on both public and private companies (>100,000 globally) broken down by industry to the nth detail. I download the revenues of every company in a business and cross check against my aggregate values.<br />In spite of all of these efforts, you may still find your self faced with uncertainty, as I was with the cab business (where I had to go city by city and then extrapolate from there). Aswath Damodaranhttps://www.blogger.com/profile/12021594649672906878noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-73175371652481533332014-12-03T12:26:01.819-05:002014-12-03T12:26:01.819-05:00Great angle to take.
It's too easy to sit on ...Great angle to take. <br />It's too easy to sit on the sidelines and debate inputs. <br />Respect goes to anyone who has the courage to actually play the game, regardless of relative success.Frankhttps://www.blogger.com/profile/16186223257106205243noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-23225870934725556142014-12-03T10:56:50.880-05:002014-12-03T10:56:50.880-05:00Is it possible you take this to the next level and...Is it possible you take this to the next level and articulate how one can arrive at a set of internally consistent numbers for the different narratives? What checks do you do? What sources of data do you depend on?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-4471925424893472952014-12-03T09:29:52.992-05:002014-12-03T09:29:52.992-05:00Hello Prof.,
one of the best posts of recent mont...Hello Prof.,<br /><br />one of the best posts of recent months. Not because it provides with shocking new insights, but because you take the time to explain what the different choices could be and why and why it is important to have a look at the narrative.<br /><br />The Excel file is then a "piece of art", as it allows playing with the inputs, and while there are many different view on what might or might not be important, it is a consistent toy to play with (especially as it allows manual inputs at times)!<br /><br />What would be interesting to lean how you go about getting your inputs on market size etc.<br /><br />Please keep up the excellent work!Tomnoreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-33562928737551701592014-12-03T04:13:43.770-05:002014-12-03T04:13:43.770-05:00Hi professor,
Always a fan of your work and reall...Hi professor,<br /><br />Always a fan of your work and really impressed you took on the challenge/controversy of valuing things like FB, TWTR, TSLA and AAPL in the past and were pretty good at trading them too!<br /><br />On Uber, I would think that a bottom-up way to estimate revenue would be better than looking at the overall market - since it's hard to say whether its going to enlarge the market by 50% or 300% (and I believe this is probably the most relevant narrative debate - whether this is habit changing or just market share gaining). <br /><br />We can assume a certain $/trip (and even break it out by city). For convenience I will assume a $15 gross receipt, with higher numbers in NY, SF, London but assuming smaller tickets in EM. A 20pct cut off of that would be ~3$/ride. <br /><br />For quantity, we should focus I think on high density urban dwellers since this would likely be the main market. I have excluded very underdeveloped EMs, as well as China. I believe in China Uber will be limited to foreign travellers and local players like Tencent's Wechat Taxi service is likely to dominate (this has been the story again and again for China, a foreign company gets max 10% share). I will just exclude the China opp to be conservative. This gives me a market size of about 600m people. Of this TAM, I will assume 1/3 of them use the Uber service. <br /><br />Rides / person / year is the biggie. Someone who travels every day via Uber will average 700 rides / day while some may only use the service once a month or a few times a year. I think 5% of the users or 9.9m people globally can easily use the service 200 times/year on average. Another 10% or ~20m may use on a weekly basis and average 50 trips / year. Another 20% I will assume uses 10 trips per year and the rest I will assume only use 5 trips per year on Uber.<br /><br />This will lead to total revenues of about ~$12bn, on assumption of $3 net revenue per ride (gross billing of $15). If Uber can manage a 30% profit margin (light infrastructure costs, network effects) this would lead to $3.6bn revenue at maturity (maybe 10 years from now) - and giving a stable, platform like multiple of 18x (Google, Visa come to mind) would give it a valuation of $67bn at relative maturity.<br /><br />I think these assumptions are reasonable and somewhat conservative, esp on rides / user and $ / ride, although perhaps a bit aggressive on percentage of population that use the service.jk0621https://www.blogger.com/profile/13181357808702723656noreply@blogger.com