Goldman Sachs' Eric Sheridan explains his buy rating on Uber

NASDAQ falling 1.5% and giving up a big chunk of its gains for the week. Joining us now is Eric Sheridan, Managing Director at Goldman Sachs. Eric, good to see you. Great to see you, Craig. All right, let's dig into this tech sell-off. I mean, what do you think happened today? Again, we're going to continue to see this throughout the show. It's a low-volume day. It's a holiday week. Whether you think it's algos or real traders, what do you think led to this action? It's kind of got a multiple choice for you. Is it the strong dollar? Is it Fed uncertainty? Is it high valuations in the market finally getting some religion when it comes to those valuations? I think it's a little bit of all of the above. It's a thin market volume at the end of the year. The week between Christmas and New Year's is historically highly volatile on low volume. But it has been a very good year for tech. Even in our preview for 2025, we pointed people towards names that we hadn't in a while, names like Uber that had underperformed more recently in the last one to two months, as opposed to the names that are exiting the year at 52-week highs. We are starting 2025 in a strong end-demand environment. That typically is good for tech when demand is good. But interest rates are volatile, FX and currency translation is likely going to be a headwind in the way companies talk about Q1 guidance. So you could see heightened volatility to start the year. And we would maybe shift a little bit into some of the names that are less at the top of the mind among the largest cap names in the group and look at some of the smaller mid-cap names or even a name like Uber. All right. So, Eric, you brought it up. That's your top pick for 2025. It's Uber. I've got a lot of questions about this being your top pick. So if you look at the chart, it's basically flat since the Fed's hawkish cut. So small sample size. But at the same time, it's a very inflation sensitive company. It's also a disruptive company that might be getting disrupted by autonomous driving. I mean, why would that be your top pick when we continue to talk about the growth of AI going into next year? AI is going to enable that autonomous driving. Why Uber? Well, I always try to pick something that's a little bit contrarian at the end of every year. A year ago was Amazon and there were fears about Asia e-commerce into the West and how AI would impact AWS. And you saw how Amazon performed in the last 12 months. Right now, Uber is weighed down by a handful of debates. As you pointed out, autonomous vehicles. We think that is a potential risk factor. The one that will play out over a very long duration, a period of time. And over the next one to two years, the vast majority of autonomous vehicle supply has nowhere near the unit economics to go direct to consumer in most markets and will end up as supply or choice for you inside the Uber app. We acknowledge their lapping inflation in pricing, but in the trends we can see through Q4, we actually think the company is well on track for hitting or exceeding the themes and the targets they had laid out at their investor day just this past February. It's outsized growth and it's re-rated down to a lower value on gap earnings looking out to 2025 and 2026 that makes it quite compelling here. What does the market need to see, however, because I look at the street, 88 percent of analysts are recommending this stock by our overweight rating. But the shares this year are flat. Over the last six months, they're down 13 percent. So why do you see that disconnect, especially, you know, your point is that it's one of the few value plays in big tech right now. I would say, number one, Leslie, it's results. You need to see results. There's fear about volumes on the mobility side. People are taking a small sample size of what's happening with Waymo in San Francisco and extrapolating that out as if that's going to be the normative fact pattern for the rest of the world. That's going to play out over a very long period of time. And we still think San Francisco isn't exactly what we would take away as an indicative exhibit. So we look at results in February. We look at the company's actions potentially on returning more capital to shareholders. And by the way, there are no questions about their delivery business, where we're seeing quite high end demand. And we highlighted in our year ahead piece that local commerce broadly defined as things delivered to you same day and within a few hours feeds well into these food delivery businesses, morphing into wider local commerce platforms, the door dashes, the Uber Eats and the Instant Carts of the world. We think that's a theme that's underappreciated and undervalued right now inside Uber as well away from the mobility business.