Uber: Autonomous Vehicle Relationship With Waymo Shows Signs of Fracture

Key Morningstar Metrics for Uber Technologies

• Fair Value Estimate
  : $76.00
• Morningstar Rating
  : ★★★
• Morningstar Economic Moat Rating
  : Narrow
• Morningstar Uncertainty Rating
  : Very High

According to the Financial Times, Waymo is exploring a future split with Uber Technologies UBER as the companies lobby for different regulatory frameworks for autonomous vehicles. They currently have exclusive partnerships in Austin and Atlanta.

Why it matters: The partnership between Uber and Waymo, in which Uber exclusively ensures high utilization of Waymo’s vehicles during nonpeak hours, has fueled a popular bull thesis that positions Uber as an entrenched demand aggregator. That thesis is much less plausible if Waymo doesn’t extend the relationship.

• Waymo appears set on its attempt to eventually disintermediate Uber by directly owning the rider relationship. It is also supporting costly permitting barriers for new autonomous vehicle companies, many of whom partner with Uber. On the flip side, Uber is lobbying policymakers to enshrine hybrid autonomous/human networks, which threatens AV verticalization.
• We expect the Austin and Atlanta exclusivity agreements and the shared infrastructure between the two firms to expire in the first half of 2028. Vastly diverging interests, with Waymo seeking to become an independent automated rideshare platform and Uber seeking to maintain a dominant position, keep our hopes for reconciliation low.

The bottom line: We reduce our fair value estimate to $76 per share from $85 for narrow-moat Uber as we incorporate increased headwinds to pricing power in urban areas where Waymo is gaining adoption. We also increase our expectations for capital reinvestment intensity, as Uber will likely need to invest in more AV upstarts to offset the expected loss of the Waymo partnership.

• Uber has the dominant network in ride-hailing, with Waymo representing only a fraction of a percent of its total rides per quarter. But we see Waymo and Tesla as credible long-term threats, especially as AV hardware becomes more economical.