Robo-taxis make up just 1% of U.S. rides. But the disruption threat of autonomous vehicles to Uber Technologies has become an obsession on Wall Street -- and has depressed the value of the company's stock.

Investors, however, seem to be overreacting to the robo risk -- and an apparent fraying in Uber's relationship with Waymo, the leader in autonomous vehicles. The fact is that Uber remains dominant in ride-hailing, is the market leader in food delivery, and has an autonomous-vehicle strategy that doesn't rely on Alphabet's Waymo.

Uber's stock, now trading around $76, looks appealing at nearly its lowest valuation since going public in 2019.

"Valuation is increasingly disconnected from its fundamentals," wrote investor Bill Ackman last week in an investor letter, noting that the company's earnings are expected to rise 35% this year. Uber is one of Ackman's largest holdings. His firm, Pershing Square, owned over $2 billion of Uber on March 31.

The stock is down 7% year to date, and up 69% since its initial public offering at $45 a share. That's way below the returns on the S&P 500 index and technology leaders like Apple, Amazon.com, and Alphabet. Uber now trades at about 17 times projected 2027 earnings and for about 12 times expected 2027 free cash flow of $13 billion.

The disruption risk to Uber, which dominates the market for ride-sharing involving drivers, is far off. It's probably going to take years for robo-taxis to account for a significant share of U.S. rides. They're now in about seven cities, and will rise to 15 by year end.

The rollout of robo-taxis has been far slower than proponents anticipated. They face technology, regulatory, and political obstacles, plus the reluctance of many Americans to trust driverless cars.

Uber, to be sure, is positioning itself to be a major participant in the robo market even if Waymo, the leader in autonomous vehicles, moves away from its Uber partnership. But it is facing another threat in the form of Tesla and its robo-taxi strategy, which is now in the early stages.

That all aside, there's a good case to be made for Uber.

Why? Uber amounts to a technology utility that dominates the ride-hailing ecosystem with eight times the revenue of No. 2 Lyft. It takes a cut of the fares paid to drivers and has a growing ad business.

Uber is valued at a discount to both the electric utility sector and S&P 500 index with faster growth. Utilities and the S&P trade for about 20 times next year's projected earnings.

"The market sentiment and stock market valuation of Uber imply greater robo-taxi roadkill than I think is warranted," says Mark Mahaney, an analyst at Evercore ISI.

"The market underappreciates the structural advantage of Uber as a massive demand aggregator and underestimates its ability to get robo-taxis into its fleet," he says.

The company, Mahaney adds, has over 200 million active customers who use its services each month. He has an Outperform rating on Uber and an admittedly ambitious price target of $150 a share.

Mahaney calls Uber a "dislocated high quality" stock, meaning it's out of favor with investors. (He puts depressed Netflix and Meta Platforms in the same category.)

Uber's recent second-quarter earnings report highlighted its still-robust growth. Revenue was up 11%, to $14 billion, and gross bookings rose 22%, to $58 billion -- both adjusted for currency -- while adjusted earnings rose 35%, to 81 cents a share.

The company guided to similar growth in the third quarter in bookings and adjusted earnings.

Free cash flow totaled $10 billion over the past 12 months and is expected to hit $13 billion in 2027, resulting in an 8% free-cash-flow yield. Uber doesn't pay a dividend but aims to use half of its free cash flow for stock repurchases.

The company, meanwhile, has an excellent balance sheet, with cash and investments of $27 billion exceeding debt of $11 billion.

But Uber's stock is in purgatory now, largely because investors await greater clarity on the robo-taxi outlook. The fear: Autonomous vehicles will take off, cutting into traditional driver rides -- and that consumers will use the Waymo app to get a car, eroding Uber's current dominance.

The stock hit a recent low of $65 in late July amid reports that Waymo may end its partnership with Uber in Atlanta and Austin, Texas, next year, figuring it doesn't need Uber to reach riders.

CEO Dara Khosrowshahi sought to reassure investors about Uber's growth outlook and robo-taxi position on its recent second-quarter conference call.

He called Waymo a "very very important partner of ours" and that the two continue to operate in Atlanta and Austin. "At the same time, we want to make sure that we're not dependent on one partner. And we're absolutely seeing a plethora of newer players in the AV ecosystem."

Uber has committed $10 billion over the next few years to robo-taxis and plans to deploy 120,000 cars on its network. Its partners, however, aren't household names, including Nuro, Wayve, and Zoox.

"We believe that AVs will help supplement Uber's existing human-led supply, leading to superior unit economics and a more favorable consumer experience relative to stand-alone AV fleets," wrote Jefferies analyst John Colantuoni in a recent client note. He boosted his 12-month price target for Uber to $110 from $100 and reiterated the stock as a top idea, or "Franchise Pick."

Given that demand for rides varies greatly during the week, heavy on Saturday night and light overnight, it doesn't make sense to deploy huge numbers of robo-taxis that may sit idle much of the time. That argues for a hybrid model.

Uber is more than just a taxi business. It gets about 55% of its revenue from ride-hailing; 35% from Uber Eats, the industry's leader in food delivery; and 10% from a freight business. Also: Uber is solidifying its position in global food delivery with its deal last month to purchase Europe's Delivery Hero for $15 billion, giving access to new markets.

The value of the food delivery is significant.

DoorDash, which competes against the larger Uber Eats, trades for 31 times estimated 2027 earnings, a premium to Uber, because of less perceived disruption risk. If you Value Uber Eats at DoorDash's price/earnings ratio, then the implied P/E of Uber's ride-hailing business is even lower than Uber's overall P/E multiple of 17. That underscores the inexpensive valuation on Uber stock.

The bottom line? Uber probably won't be dislodged as an industry leader -- and its discounted price allows investors to get onboard at a low price.