Uber Goes Rogue With Wild $1.5 Billion Stock Buyback Spree - CEO Declares Stock “Undervalued”

Uber’s stock just got a little extra juice, popping 2.7% Monday (up 1.02% today) after the company announced it’s hitting the turbo button on its $7 billion buyback plan with a $1.5 billion accelerated stock repurchase (ASR). And if you ask Uber’s CFO Prashanth Mahendra-Rajah, this isn’t just strategic—it’s borderline highway robbery. Why? Because, according to him, Uber is “undervalued relative to the strength of our business.” That’s cryptic for “We’re a bargain, and we know it.”

(Source: Giphy) 

In short,  the ride-hail and food-delivery giant made a deal with Bank of America to buy back 18.6 million shares, roughly 80% of the total shares covered under the ASR. The remaining 20% will follow in Q1, which means Uber’s market cap—$136 billion as of Monday—just got a little more exclusive. For those keeping score at home, this $1.5 billion spree is just one lap in the marathon that is Uber’s $7 billion buyback program, which first hit the streets in February 2024.

According to Mahendra-Rajah, “We’re entering 2025 with considerable momentum,” he said, dropping phrases like “scaling free cash flows significantly” and “returning meaningful capital to shareholders”. But the cherry on top is that the ASR will retire over 1% of Uber’s market cap, giving the remaining shareholders a little extra shine.

(Source: Investopedia) 

Now if you’re  wondering why Uber’s suddenly in a buying mood, it’s not just about capital allocation. The company has been riding the wave of strong earnings growth despite some investors clutching their pearls over the rise of autonomous vehicles (AVs) from the likes of Waymo and Tesla. Sure, the AV industry has been touted as the Grim Reaper for Uber’s ride-hailing dominance, but analysts aren’t convinced.

According to a note from Wedbush, the AV threat is still over the horizon, and Uber’s core businesses—ride-hail and food delivery—are humming along nicely. In fact, Wedbush just added Uber to its “best ideas” list, which is basically Wall Street’s version of a gold star.

(Source: Investing.com) 

Still, investors haven’t fully shaken their robotaxi jitters. Uber’s stock, which hit an all-time high of $87 last October, is still down 25% from that peak. The buyback, then, serves as a two-for-one: a vote of confidence in Uber’s future and a not-so-subtle way to prop up a sagging share price.

Of course, this isn’t Uber’s first foray into stock buybacks, but it’s definitely its boldest. The company spent $697 million buying back shares in the first three quarters of 2024, dipping its toes into the waters of shareholder returns. But the $7 billion plan—its first-ever buyback program—marked a turning point, signaling that Uber’s days of endless cash-burning in pursuit of growth might finally be in the rearview mirror.

(Source: Giphy) 

That said, the buyback spree comes with a side of irony. Uber famously pulled the plug on its in-house autonomous vehicle ambitions five years ago, selling the division to Aurora Innovation in favor of focusing on its bread and butter. Now, it’s staring down a future where AVs could eat into its market share, and it’s using buybacks to keep investors happy in the meantime.

At the end of the day, this is no doubt a calculated move by Uber. By aggressively buying back shares, the company is sending a clear message: it believes in its own growth story, and it’s willing to put its money where its mouth is. Whether that confidence pays off in the face of AV competition remains to be seen, but for now, Mahendra-Rajah and Co. seem content to let the numbers—and the buybacks—do the talking.

In the meantime, place your bets accordingly friends and as always, stay safe and stay frosty! Until next time…

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Stocks.News does not hold positions in Uber and Tesla as mentioned in the article.