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Portfolio manager explains the 'tricky thing' about Uber and other ride-hailing companies

Jennifer Shanker
Production Assistant

The highly-anticipated Uber (UBER) IPO is finally here, making its debut today at the New York Stock Exchange at about $45 per share.

The ride hailing app has successfully transformed the way we ride and think about transportation, but investing in the company may be a bit more complicated.

“I think that the ride hailing companies are a little bit of a tricky thing in terms of looking for that profitability,” Alpine Woods Capital Investors Portfolio Manager Sarah Hunt said on YFi AM.

“Right now, everyone is very excited about the growth,” she added. “It's also about the convenience factor. ... It's obviously got a big mindshare. Most of us have the app on our phones. But, to me, it's a little bit tricking because ... I can check different prices very quickly in a way that for other things, like Amazon, I don't tend to do."

A driver with placards for both Lyft and Uber waits for a traffic light outside South Station in Boston after picking up a passenger on Jun. 15, 2017. (Photo by Lane Turner/The Boston Globe via Getty Images/photo inverted by Yahoo Finance)

Adding drivers into the mix also complicates things.

“At some point, the profitability for drivers becomes a little bit tricky because there are too many people trying to drive at the same time and you have more than one company who is doing this,” Hunt said. “I think you need to see more of the other parts of the business either come in to be more profitable or find some way where those drivers become more profitable.”

Uber plans to enter the autonomous driving space, and it’s not alone. Last week, Tesla CEO Elon Musk told investors that he predicts driverless cars will bring Tesla to a $500 billion market cap by 2021.

“So the question is really going to be: Can you get to a point where all of these companies are either pricing in a way that allows them to be profitable?” Hunt said. “Or have they grown enough in the markets that they need to grow so that they can look at profitability and focusing on that?”

Jennifer Shanker is a Production Assistant at Yahoo Finance. Follow her on Twitter.

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