Uber gets the hang of navigating multiple lanes

Second gear. Dara Khosrowshahi is proving his abilities behind the wheel. The Uber Technologies boss on Wednesday unveiled his company’s first-ever share repurchase program, showing just how far it has come from incinerating cash to generating it. Its valuation suggests lingering fears about the hybrid business model, but it’s safe to go along for the ride now.

Uber intends to buy back $7 billion of its stock, initially to offset some equity-based compensation and then to shrink the share count. The plan was accompanied by fresh guidance that it expects adjusted EBITDA to grow on average by as much as 40% over the next three years. The return of capital and other morsels included in an 82-page investor presentation propelled the share price by 12% to a record high of about $77 for a market value approaching $160 billion.

Part of the newfound exuberance reflects Uber’s position as king of the road in terms of ferrying people to various destinations. In the fourth quarter, revenue from what the company calls its mobility division, increased 34% to $5.5 billion, significantly outpacing the 4%, and $1.2 billion, at rival Lyft.

Khosrowshahi has made good progress in getting food to customers, too. Although Uber sits at a distant second to $47 billion DoorDash, which accounted for two-thirds of the U.S. meal-delivery market in December according to Bloomberg Second Measure, cross-selling its various services shows promise.

More than a third of Uber’s monthly customers – in areas where they can – order both rides and food, and in turn spend three times as much as those using just one or the other. This network effect helped Uber turn 83% of EBITDA into $3.3 billion of free cash last year, and it anticipates the proportion will grow to 90% by 2026.

These achievements command a valuation multiple of 14 times JPMorgan’s EBITDA estimate of $11 billion in 2026, a deserved premium to the approximately 6 times for Lyft using outlooks gathered by LSEG. And yet Uber trades at a small discount to more narrowly focused and unprofitable DoorDash. With Khosrowshahi getting the hang of navigating multiple lanes, there’s reason to think his company should pull ahead.