Best Stock to Buy Right Now: Uber vs. Carvana

While both Uber and Carvana have shown impressive growth, Uber is currently the better investment due to its alignment with a secular trend of decreasing car ownership, with analysts projecting an 11% annual growth in the ride-hailing market through 2033 and a 17% annualized growth in food delivery. Carvana's recent success is largely attributed to pent-up demand for used cars amid limited new car production, a trend that is unlikely to persist, and its stock is currently trading 14% above analysts' consensus price target, while Uber's is 16% below.

Analysis

Uber Technologies (UBER) and Carvana (CVNA) present contrasting investment theses. Uber, a $175 billion ride-hailing and delivery giant, reported nearly $44 billion in revenue and almost $3 billion in operating net income last year, with total rides up 18% to over 11 billion. The company commands three-fourths of the U.S. ride-hailing market and is expanding internationally, with nearly half its revenue now from deliveries and freight. Conversely, Carvana, a used car dealer, achieved $13.7 billion in revenue (up 27% year-over-year) and $404 million in net income in 2024, benefiting from a rebound in demand and its technology-driven approach. Despite both showing growth, their stock performances diverge: CVNA shares have surged over 200% in the past year, testing 2021 highs, while UBER shares have seen little net progress since March of the previous year, impacted by occasional modest shortfalls against expectations. The article posits that Uber is better positioned for sustained growth, citing a secular trend of declining car ownership, particularly among younger demographics (44% of U.S. individuals under 35 would consider forgoing vehicle ownership). The global ride-hailing market is projected to grow at over 11% annually through 2033, and the food delivery market at 17% annually, both favoring Uber. Carvana's recent success is attributed to cyclical factors, such as the average U.S. vehicle age reaching 12.6 years, and a short-term inventory squeeze on newer used cars, which may not be sustainable. Furthermore, UBER's stock is trading 16% below its average analyst price target of $97.39, with most analysts rating it a strong buy, whereas CVNA's stock is 14% above its consensus price target.

Key Decisions for Investors

• Investors should consider Uber Technologies given its dominant market share, strong revenue growth, alignment with secular trends towards reduced car ownership, and its current stock valuation below analyst consensus targets.
• Caution is warranted for Carvana, as its recent robust performance appears linked to cyclical demand and specific inventory conditions in the used car market, with its shares currently trading above analyst price targets.
• Monitor Uber's execution in capitalizing on projected growth in ride-hailing and delivery sectors, and scrutinize Carvana's ability to sustain growth amidst potential headwinds from normalizing used car demand and inventory availability.