In this article, I have evaluated Uber Technologies, Inc. (UBER) and N-able, Inc. (NABL) to determine which stock could be worth buying to capitalize on the industry’s growth prospects. After comparing these stocks fundamentally, I think NABL can generate superior returns based on the factors discussed throughout this article.
Before comparing these stocks, let’s see what’s shaping the tech industry’s prospects.
According to Gartner, global IT spending will reach $5.10 trillion in 2024, a rise of 8% year-over-year. The growing need for digital transformation and automated business processes across industries is driving this surge in IT spending. The IT sector will likely grow significantly in the coming years as businesses continue to rely on technology.
Moreover, firms focusing more on digital with access to advanced technologies for driving growth while decreasing cost, growing usage of cloud technologies, and using business intelligence to earn increased revenues are fueling growth in the IT market.
Therefore, the United States IT Services market is expected to grow at a CAGR of 6.5% until 2028.
UBER gained 57.8% over the past nine months compared to NABL’s 17.1% gain. The stock gained 89.4% over the past year compared to NABL’s 6.2% returns.
However, here are the reasons why I think NABL might perform better in the near term:
Recent Developments
On September 20, 2023, UBER and Staples, the working and learning store, announced that they were teaming up to bring business, office and school essentials to customers across the US. This should boost revenues.
Conversely, On November 20, 2023, NABL announced Cove Data Protection for Microsoft 365, offering an additional layer of protection against data loss for Microsoft Teams, including backup and recovery of teams, members, settings, and files.
Recent Financial Results
For the third quarter ended September 30, 2023, UBER’s revenue increased 11.4% year-over-year to $9.29 billion. Net income attributable to UBER came in at $221 million, compared to a net loss of $1.21 billion for the same quarter. Its net income per share came in at $0.10 as compared to negative $0.61 for the same quarter. However, its total costs and expenses increased marginally year-over-year to $8.90 million.
On the contrary, NABL’s revenue for the fiscal third quarter ended September 30, 2023, rose 15% year-over-year to $107.57 million. Its gross profit rose 15% year-over-year to $90.21 million. Its net income increased significantly year-over-year to $6.01 million, and net income per share stood at $0.03.
Past and Expected Financial Performance
Over the past year, UBER’s revenue grew at a 23.8% CAGR. Analysts expect UBER’s revenue to increase by 16.5% this year and 13.5% in the fourth quarter ending December 2023. Its EPS is expected to decline 45% in the current quarter (ending December 2023).
Conversely, NABL’s revenue has increased at a CAGR of 12% over the past year. Its revenue is expected to increase 13.1% this year and 11.8% in the fourth quarter ending December 2023. Its EPS is expected to rise 1.5% this year and 9.4% in the next quarter ending March 2024.
Valuation
UBER’s forward EV/EBITDA multiple of 29.38 is higher than NABL’s 17.29. However, UBER’s forward EV/Sales of 3.15x is lower than NABL’s 5.74x.
Profitability
UBER's trailing-12-month gross profit margin of 32.41% is lower than NABL’s 84.40%. In addition, UBER’s trailing-12-month EBIT margin of 0.88% is lower than NABL’s 15.65%.
Thus, NABL is more profitable.
POWR Ratings
UBER has an overall rating of C, which equates to a Neutral in our proprietary POWR Ratings system. Conversely, NABL has an overall rating of B, translating to a Buy. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. UBER has a C grade for Stability, which is justified by its 24-month beta of 1.32. On the other hand, NABL has a B grade for Stability, which is in sync with its 24-month beta of 0.68.
Among the 75 stocks in the Technology – Services industry, UBER is ranked #49, while NABL is ranked #10.
Beyond what we’ve stated above, we have also rated both stocks for Value, Momentum, Sentiment, Growth and Quality. Get all UBER ratings here. Click here to view NABL ratings.
The Winner
The tech industry is expected to keep seeing substantial growth thanks to the growing market for emerging technologies. Industry players such as UBER and NABL are well-positioned to benefit from these industry tailwinds.
However, NABL seems to be the better buy here, considering its higher margins and stability.
Our research shows that the odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the top-rated stocks in the Technology – Services industry here.
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NABL shares were trading at $11.86 per share on Wednesday morning, down $0.00 (0.00%). Year-to-date, NABL has gained 15.37%, versus a 20.13% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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