On Oct. 31, Uber Technologies (UBER Quick QuoteUBER - Free Report) reported better-than-expected third-quarter 2024 earnings per share and revenues, before the opening bell. This was the second successive quarter in which the company had reported better-than-expected results after posting a loss in the first quarter of 2024. Adding to the optimism, third-quarter 2024 earnings and revenues increased significantly year over year. During the September quarter, the company delivered over $1 billion in operating income (on a GAAP basis) for the first time.

The better-than-expected results naturally raise the question: Should investors buy UBER stock now? A more in-depth analysis is needed to make that determination. Before diving into UBER’s investment prospects, let’s take a glance at its quarterly numbers.

Snapshot of UBER’s Q3 Results

UBER’s quarterly earnings per share of $1.20 outpaced the Zacks Consensus Estimate of 41 cents and improved more than 100% on a year-over-year basis. Total revenues of $11.2 billion beat the Zacks Consensus Estimate of $10.9 billion. The top line jumped 20% year over year on a reported basis and 22% on a constant currency basis.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

With economic activities returning to normal levels in the post-pandemic scenario, people are traveling to work and other places as before. As a result, UBER’s Mobility business has been seeing buoyant demand, with segmental revenues increasing 26% in the September quarter.

With customer traffic picking up, gross bookings from the unit were highly impressive, aiding third-quarter results. Gross bookings from the Mobility segment in the September quarter increased 17% on a year-over-year basis to $21 billion.

Uber’s Delivery business also performed well in the quarter, with segmental revenues growing 18% year over year. Gross bookings from the Delivery segment in the September quarter rose 16% on a year-over-year basis to $18.7 billion.

Trips soared 17% to 2.9 billion, or approximately 31 million trips per day on average.

The Slowdown in UBER’s Gross Bookings Raise Concerns

Despite reporting better-than-expected results, UBER shares have declined 7.5% following its Oct. 31 earnings release. The slower-than-expected growth trajectory disappointed investors. In the fourth quarter of 2024, gross bookings are anticipated to be in the $42.75 billion to $44.25 billion range, representing growth on a constant currency basis in the 16-20% band from fourth-quarter 2023 actuals.

For the final quarter of the year, the year-over-year growth in trips is expected to be similar to that witnessed in third-quarter 2024. The outlook, which assumes a roughly two percentage point currency headwind to total reported year-over-year growth, was deemed to be conservative, leading to the share price depreciation.

Total gross bookings in the quarter increased 16% year over year to $41 billion. The year-over-year growth was less than the 19% witnessed in the second quarter of 2024, highlighting the growth slowdown. The Mobility segment is the primary cause for concern in this respect, with segmental gross bookings coming in at $21 billion for the third quarter, below our estimate of $21.7 billion. Moreover, there was only a marginal improvement in segmental gross bookings from the $20.5 billion witnessed in the second quarter of 2024. Gross bookings from the Mobility segment in the September quarter increased 17% as opposed to the 23% year-over-year growth witnessed in the second quarter of 2024.

The above numbers highlight the slowdown-related concerns. 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.

The absence of any fresh updates on share repurchases also disappointed investors, contributing to the post-earnings share price decline. In fact, UBER shares have performed below expectations over the past six months, underperforming the S&P 500 index, of which Uber is a key member, as well as fellow industry player DoorDash (DASH Quick QuoteDASH - Free Report) .

Six-Month Price Comparison

Image Source: Zacks Investment Research

How Should Investors Approach Uber Shares Post Q3 Earnings?

Diversification is imperative for big companies to reduce risks, and UBER has excelled in this area. It has engaged in numerous strategic acquisitions, geographic and product diversifications and innovations. Even though Uber’s primary business is ride-sharing, it has diversified into food delivery and freight over time.

Uber’s endeavors to expand into international markets are commendable and provide it with the benefits of geographical diversification. Prudent investments enable it to extend services and solidify its comprehensive offerings. Its focus on disciplined spending and cost-cutting measures also bodes well for bottom-line growth.

Despite the above tailwinds, concerns regarding the gross booking slowdown cast a shadow over UBER’s investment worthiness at present.

Uber’s valuation is stretched at the moment, as suggested by the Value Score of D, which makes the stock risky.

In terms of the forward 12-month Price/Earnings ratio, UBER is trading at 34.44X, higher than the industry’s 20.48X.

Image Source: Zacks Investment Research

Uber shares are more expensive than its rival Lyft (LYFT Quick QuoteLYFT - Free Report) , which trades at 14.02X, lower than the industry reading.

We are also concerned about Uber’s high debt levels. Long-term debt increased 31.5% to $11 billion at third-quarter 2024-end from 2019. 

Long-Term Debt to Capitalization

Image Source: Zacks Investment Research

Currently, Uber carries a Zacks Rank #3 (Hold), which implies that investors should wait for a better entry point to accumulate the stock instead of buying it now following the third-quarter earnings and revenue beat. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.