According to The Wall Street Journal, Uber may go public in early 2019 and potential IPO underwriters may be valuing Uber at US$120 billion, only slightly above our July 19 report where we valued Uber at an estimated US$110 billion market capitalization.
We found a couple of data points within the Journal article that were somewhat aligned with our prior analysis. While the underwriters’ valuation is comparable with ours, we note that the Journal indicated that Uber's revenue is expected to be US$10-11 billion in 2018, below our prior net revenue estimate of US$12.4 billion. In our view, the shortfall from our estimate might not necessarily be due to lower demand, but perhaps due to Uber's gross billings take rate, as we had projected Uber’s 2018 gross billings take rate to be more comparable with 2017. We do expect some pressure to build on that take rate due to the firm’s more aggressive attempt to attract drivers, and if it must meet minimum wage requirements. While we have modeled a decline in take rates after 2018, we think they will remain in the 20%-30% range long-term.
In addition, the banks involved are valuing UberEats at US$20 billion, representing around 3 times the US$6 billion in gross revenue they expect the meal takeout and delivery service to generate this year. Assuming a gross revenue average growth rate of around 50% the next two years (as the UberEats business is in its early growth stage), such valuation of UberEats represents 2 times and 1.5 times 2019 and 2020 gross revenue, respectively, which we view as reasonable. We note that we expect a 29% 10-year CAGR in gross revenue for UberEats and only a 15% CAGR for Grubhub, which is the market leader in the U.S. Unlike UberEats, Grubhub is not pursuing international markets aggressively.