How to Play UBER Stock Following the Delivery Deal With Five Below

Uber Technologies UBER inked a deal with value retailer Five Below FIVE in a customer-friendly move. The deal makes customers of Five Below eligible to use the Uber Eats app for placing orders for delivery from more than 1,500 stores of the discount retailer. The delivery will be made directly to their doorsteps. This indicates the customer-friendly nature of the deal. Uber Eats is the online food ordering and delivery platform of Uber.

This partnership allows customers to shop for a range of budget-friendly, trending items, including toys, games, candy, crafts, tech, room décor, beauty and graphic T-shirts. They will be available without any delivery fee for members of the Uber One loyalty program.

The partnership with Five Below is in sync with Uber Eats’ strategy to grow its non-food retail offerings, thereby providing consumers access to a wider range of goods beyond traditional meal delivery. The move also supports Uber’s aim to enable retailers to tap into digital commerce and enhance customer reach through efficient delivery solutions.

However, does this move by UBER make the stock worth betting on? Let’s delve deeper to answer the question.

Factors Working in Uber’s Favor

Impressive Price Performance: Uber has navigated the recent tariff-induced stock market volatility well, registering a 40.4% year-to-date gain and performing better than the S&P 500 index, the Zacks Internet-Services industry, and rival Lyft LYFT in the same timeframe.

YTD Price Comparison

Over the past year as well, Uber shares have performed much better than Lyft.

Impressive Earnings History: Uber surpassed the Zacks Consensus Estimate for earnings in each of the last four quarters, the average beat being 212.3%.

Uber Technologies Price and EPS Surprise

Uber Technologies, Inc. price-eps-surprise | Uber Technologies, Inc. Quote

Focus on Lucrative Robotaxi Market: Uber aims to gain a stronghold in the highly promising robotaxi market through strategic partnerships. The above association is a step on that front. By adopting this approach, Uber has avoided massive R&D costs associated with developing autonomous systems independently. With its vast network of drivers and customers, UBER can quickly scale autonomous services once the technology matures. Uber’s rival in the ride-sharing market, Lyft, is also aiming to be a key player in the lucrative and emerging autonomous vehicle market, highlighting the immense competition in the space. The global robotaxi market, which was valued at $0.4 billion in 2023, is projected to reach $45.7 billion by 2030 at a CAGR of 91.8% from 2025 to 2030.

Commendable Expansion Efforts: Even though Uber’s primary business is ridesharing, it has diversified into food delivery and freight over time. Diversification is imperative for big companies to reduce risks, and UBER has excelled in this area. The company has engaged in numerous acquisitions, geographic and product diversifications, and innovations. Uber’s endeavors to expand into international markets are commendable and provide it with the benefits of geographical diversification. Prudent investments enable Uber to extend services and solidify its comprehensive offerings.

Uber’s Buyback Strategy Signals Confidence: In 2024, Uber generated a record $6.9 billion in free cash flow, with an adjusted EBITDA of $6.5 billion. Uber’s announcement earlier this year to start an accelerated $1.5 billion stock buyback program highlights not only its shareholder-friendly strategy but also signals confidence in its ongoing business strategy. The $1.5 billion plan is part of the company's $7 billion buyback program announced last year.

Not an Opportune Time to Buy UBER Stock Yet

Despite the abovementioned tailwinds , there are a couple of factors that keep us cautiously optimistic. We are concerned about Uber’s high debt levels. Long-term debt increased 45.6% to $8.3 billion at 2024-end from 2019. 

Long-Term Debt to Capitalization

UBER stock is not cheap, as its Value Score of D suggests a stretched valuation at this moment. In terms of price-to-earnings (forward 12-month), UBER is trading at 26.92X, higher than the industry level of 17.97X.

Uber expects gross bookings in the second quarter of 2025 to be hurt by currency-related headwinds. Uber, which dominates the North American ride-sharing market, is likely to increase its focus on suburban markets to drive growth amid fears of market saturation.

Considering all factors, we believe it is preferable to stay on the sidelines for this Zacks Rank #3 (Hold) stock currently.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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