This post breaks down 9 serious concerns, as well as an overall view of Uber that might leave one thinking that if it were a public stock (one of the signs of weakness) you'd sell it. Uber offers a commodity. It's subject to competition, which will always keep prices down—and after it pays its drivers, it's making money, but not hand over fist. The valuation is predicated more on its growth, but it can only expand at huge scale. Bottom line, there is a lot to be skeptical about.
'For a business that is highly price elastic (e.g. if you raise prices by 50%, consumers will definitely respond by purchasing much less), that is very concerning because it means they haven’t proven that their core product is fundamentally and sustainably profitable in any way that is consistent with their valuation. They are still selling $10 bills for $10.07. There is a valid argument that they are profitable in markets where they have hit scale, but that still means they are fundamentally reliant on that scale to make money. "We make money with scale and market dominance” is not the same as “every time we deliver our service, we make lots of money"'
Let's have some real economists weigh in, shall we!
Uber’s potential to transform its industry is already proving out. In 2009, there were roughly 111,000 chauffeured vehicles on the roads in the US. According to a Washington Post article published this year, Uber was adding 20,000 drivers a month.That number, roughly 18% of the total number of chauffeured vehicles on the road in the US just 5 years prior, is impressive on its own. It’s even more impressive if you consider the fact that it’s a monthly figure that’s been accelerating over time.
You can't underestimate disruption. Add self-driving cars on top of it, and you can see where things might go. How many car companies will license Uber's technology for their self-driving cars? If that happens, you instantly have a locked-in market.
What is fiercely guarded as one of its biggest strengths — the controversial model of making all drivers operate as independent contractors — also means Uber allows drivers to work for its competitors. "Uber does not remove drivers from the driver pool. The platform is novel and revolutionary even, but not difficult to replicate. It will get replicated."