How To Make A 3.0% One-Month Yield By Shorting Uber Puts

Uber Technologies Inc logo on phone-by DenPhotos via Shutterstock

 

Last month, I demonstrated in a previous article that investors could short out-of-the-money (OTM) Uber Technologies (UBER) puts and achieve a 2.0% one-month yield. 

That was proved successful as the short put options expired worthless on Friday. Today, it's possible to make a similar one-month 3.0% yield shorting OTM puts.

Uber closed at $90.59 on Friday, and I had recommended shorting the $80.00 strike price puts expiring July 18. I showed that Uber was worth at least $95.59. This article will update that price target.

(Click on image to enlarge)

Image Source: Barchart - last six months as of July 18, 2025
 

The short put play strike was 4.7% below the trading price at the time. The premium received was $1.66; hence, the 2.0% yield (i.e., $ 1.66/$80.00 = 0.02075).

Today, it's possible to make almost a 3% yield at a strike price with a similar distance below the trading price. More on that below. First, let's look at why Uber stock looks cheap here.

Uber Stock Price Targets: FCF-Based Target

My previous price target was based on Uber Technologies' free cash flow (FCF) margins. For example, in Q1, it made $2.25 billion FCF on $11.533 billion in revenue, or a 19.5% FCF margin. That was higher than the Q4 FCF margin of 14.27%, 18.85% in Q3 2024, and 16.08% in Q2.

Stock Analysis shows that over the trailing 12 months (TTM), it generated $7.786 billion FCF on $45.38 billion in revenue, or an FCF margin was 17.16%. That was higher than the prior quarter's TTM FCF margin of 15.68%.

So, on balance, it seems reasonable to assume that going forward, Uber could make at least an 18.5% FCF margin. Using analysts' next 12-month (NTM) revenue forecasts, Uber could make at least $10 billion in FCF:

• 0.185 x $54.36 billion NTM revenue = $10.06 billion NTM FCF

Using a 4.5% FCF yield metric (i.e., 22.2x FCF) (its TTM FCF yield is 4.1%), here is how that values Uber stock:

• $10.06 billion/0.045 = $223.6 billion market value

That is +18% over Friday's market cap of $189.439 billion. In other words, Uber stock is worth +18.0% more at about $107 per share:

• 1.18 x $90.59 = $106.90 per share

P/E-Based Target

Historically, Uber stock has traded at 35.4x forward earnings, according to Morningstar's last 3 years' data (i.e., 55.5x 2023, 18.5x 2024, 32.3x current).

In addition, analysts now project 2025 earnings per share (EPS) of $2.86 this year and $3.29 in 2026, or $3.08 over the next 12 months (NTM). Therefore, we can estimate its value:

• $3.08 NTM EPS x 35.4 average forward multiple = $109.03 price target

That is +20.3% over today's price.

Analysts' Price Targets

Yahoo! Finance's analyst survey shows an average price target of $96.68 from 54 analysts, and Barchart's survey has a mean price of $100.35. Moreover, Stock Analysis says 34 analysts have an average $99.42 price target, and AnaChart.com says 37 analysts have an average of $105.86.

As a result, the average analyst price target from surveys is $100.58 per share, which is +11.0% over Friday's close.

Summary Price Targets

The bottom line is that using 3 different methods, Uber stock looks to be around 16.5% undervalued:

• FCF-based target: $106.90
• P/E-based target: $109.03
• Analyst-based target: $100.58
• Average price target: $105.50 per share +16.5% upside

As mentioned earlier, one way to play this, to set a lower buy-in price and get paid for this, is to sell short out-of-the-money (OTM) put options.

Shorting OTM Puts

The Aug. 22 expiry period, just over one month from now, shows that the $86.00 strike price put option, which is 5% below Friday's $90.59 close, has a midpoint premium of $2.53 per put contract.

That means a short-seller of these puts (i.e., enter an order to “Sell to Open” 1 put contract) can make an immediate yield of 2.94% (i.e., $2.53/$86.00 = 0.0294).

(Click on image to enlarge)

Image Source: Barchart - Uber puts expiring Aug. 22 as of July 18, 2025
 

Moreover, for investors willing to take on more risk, the $87.00 strike price put has a midpoint premium of $3.00, or a 3.45% yield (i.e., $3.00/$87.00 = 0.0345). So, in effect, the investor could use a mix of these two put options to make at least a 3.0% yield over the next month.

Moreover, the $86.00 strike price put has a low breakeven point: $86 - $2.53, or $83.47, or -7.9% below Friday's closing price of $90.59. That means that even if Uber stock fell to $86.00 over the next month, the investor's actual investment cost would be just $83.47.

Note that there is less than a one-third chance of this happening, as the delta ratio is -31%. That chance is based on historical trading volatility patterns in Uber stock. This also provides a good upside to investors, should it eventually reach the average $105.50 price target:

• $105.50/$83.47 breakeven = 1.26 -1 = +26% upside

Even if the stock does not fall to $86.00, the investor has a good expected return (ER). If this 2.94% yield can be repeated every 34 days for four and a half months (i.e., 34 x 3 times = 136 days, or four and a half months):

• 2.94% x 3 = 8.82% expected return (ER) over four and a half months

The bottom line here is that Uber stock looks deeply undervalued. One way to profitably play this is to sell short out-of-the-money (OTM) puts in nearby expiry periods.

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