Review & Outlook

Our take on the investing, financial, & economic themes of the day

Uber is Delivering Ice Cream?

18 July, 2014 by Ben O'Brien in Commentary

I got an email this morning (see below) from Uber, the tax cab smartphone app service, saying that they will now be delivering ice cream via their app. While this might seem like a strange move for a taxi cab service, it is big news since the company has become a sort of bellwether of the current technology boom. I wrote an article a few weeks ago in which I referenced a valuation of Uber by NYU professor Aswath Damodaran who thought the private company was wildy overvalued based on the venture capital investments made so far. For Damodaran the company was a symbol of the current excess in technology investing. I agreed with the analysis at the time. Damodaran did entertain the idea that the company might some day expand into other businesses, but he valued the company mainly based on its tax cab service. Damodaran later responded to critics and clarified his argument but still stuck to his guns, saying the company was not worth nearly as much as investors are paying.

 

Uber

 

The tremendous speed with which Uber has spread across the country and the world and now into new businesses shows that they are even more savvy and ambitious than most people, myself included, realized. If the company can deliver iced cream they could eventually expand into more and more products and services. While there may still be excesses in the world of Silicon Valley and technology investing these days, it is important to note that these companies have come along way since the deeply flawed tech IPO’s of the late 1990’s  that had no profits or even any viable business plans and quickly folded when the bubble burst. Though many of the app companies seem frivolous today too, they have revenues and in many cases profits. Many, like Uber, have real tangible products and services.  While we still advise against going whole hog into technology stocks, especially new and speculative ones, neither can you dismiss the impact that the rise of smartphones and apps will have on our economy and lives.

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