uber valuation_dash_070617
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Uber, The Global Urban Car Service Company (July 2017)
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The Story
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Uber is a car-sharing company founded in 2009 by Travis Travis Kalanick and Garrett Camp in San Francisco with a paper valuation at $69B. I value Uber at $48B (see my workbook). Uber’s low capital intensity model has allowed for rapid growth as measured in cities and rides, though the rate of growth has started to slow down. However, the playbook Uber has used to scale thus far is not sustainable in an increasingly artificially intelligent world. It must steer with caution or risk a crash.
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The Assumptions
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Base yearYears 1-5Years 6-10After year 10Story link
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Total Market$195,000Grow 10.39% a yearGrow 1.5% a yearUrban car services (incl. rental, logistics)
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Gross Market Share10.26%10%>40%40%Medium-sized player
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Revenue Share20.00%20% -> 15%15.00%Lower revenue share
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Operating Margin-43.08% -43.08% ->30%20.00%Costs rise
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ReinvestmentNASales to capital ratio of 2.00Reinvestment rate = 2%More capital investment model
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Cost of capitalNA10.00%10%->8.00%8.00%At 75th percentile of US firms
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Risk of failure5% chance of failure, if overvaluation leads to less financing Cash on hand + Capital access
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The Cash Flows
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Total MarketMarket ShareRevenues (15% of Gross)EBIT (1-t)ReinvestmentFCFF
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1 $ 215,261 13.23% $ 8,900 $ (2,228) $ 1,200 $ (3,429)
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2 $ 237,626 16.21% $ 11,552 $ (2,302) $ 1,326 $ (3,628)
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3 $ 262,315 19.18% $ 14,464 $ (2,142) $ 1,456 $ (3,598)
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4 $ 289,570 22.15% $ 17,641 $ (1,710) $ 1,589 $ (3,298)
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5 $ 319,656 25.13% $ 21,085 $ (965) $ 1,722 $ (2,687)
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6 $ 352,869 28.10% $ 24,791 $ 133 $ 1,853 $ (1,720)
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7 $ 389,532 31.08% $ 28,750 $ 1,626 $ 1,980 $ (354)
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8 $ 430,004 34.05% $ 32,945 $ 3,548 $ 2,097 $ 1,451
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9 $ 474,681 37.03% $ 37,348 $ 5,933 $ 2,201 $ 3,731
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10 $ 524,001 40.00% $ 41,920 $ 8,803 $ 2,286 $ 6,517
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Terminal year $ 535,005 40.00% $ 42,800 $ 8,988 $ 944 $ 8,044
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The Value
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Terminal value $ 136,345
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PV(Terminal value) $ 55,534
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PV (CF over next 10 years) $ (8,910)
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Value of operating assets = $ 46,624
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Probability of failure5%
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Value in case of failure $ -
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Adjusted Value for operating assets $ 44,293
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+ Cash on hand $ 5,000
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+ Cross holdings $ 6,000
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Value of all assets $ 55,293.17
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