Industry Spotlight

Uber vs Lyft: How will ride-hailers’ share prices fare amid lockdown?

With demand for taxi rides having dived during global lockdowns, does this mean both Uber [UBER] and Lyft’s [LYFT] share prices are set for a post-earnings dip?

Uber has seen its ride volume decrease by around 80%, while Lyft has estimated that its bookings are down 75% year-over-year, according to The Information. So, should those invested in the firms’ share prices fear the worse?

Both Uber and Lyft’s share prices fell to 52-week closing lows during the market sell-off in March, bottoming out at $14.82 and $16.05, respectively. However, their performances since then have differed. Uber has more or less clawed its way back to the price it was at the start of the year, while Lyft is still some way off its January prices. 

 

 

As of 13 May, Lyft’s share price finds itself 58% off its 52-week high of $68.33 and 60% off its IPO price of $72 (the company went public in April 2019).  

That said, there is some good news. Throughout April, Lyft’s share price has gained 14% in value, under-performing the S&P 500, which has gained 16.1% in the same time period. By comparison, Uber has gained just over 10.4% in this time. 

 

Uber and Lyft still beset by losses

Uber was beset by massive losses in the first quarter, reporting a 190% year on year increase to $2.9bn, while Lyft’s net loss of Q1 2020 decreased 63% to $398m.

$2.9billion

Uber's Q1 net loss vs Lyft's $398m

  

Despite this, the CEOs of both ride-sharing companies struck a defiant tone. Dara Khosrowshahi, CEO of Uber, and Logan Green, CEO of Lyft, both acknowledged that while the ongoing pandemic has been a challenge, they are taking action to preserve their balance sheets.

In an effort to create a healthy cash buffer, Uber has stopped hiring in the past few weeks and has laid-off 3,700 employees.

3,700

Number of Uber employees laid-off

  

Khosrowshahi says that the company is well-positioned to weather the storm but financials are currently difficult to predict, according to Barrons. The company had expected to post adjusted net revenue for calendar year 2020 of up to $17bn and an adjusted loss in the region of $1.25bn to $1.45bn. 

Uber has also launched programmes to provide financial support as well as cleaning supplies and PPE to drivers. Although it was expected that these extra measures would hurt its balance sheet, the company actually reported a 14% year-over-year jump in revenue to $3.5bn.

Meanwhile, Lyft has also undergone an aggressive cost reduction plan, which helped revenues grow 23% year-over-year to $955.7m. However, the company noted on its earnings call that rides dropped 80% during the week ending 29 March.

The company hopes to remove an estimated $300m from its annual expense run-rate by the fourth quarter of 2020. “We are prepared to weather this crisis,” Green said.

“We are prepared to weather this crisis” - Logan Green, Lyft CEO

 

Uber and Lyft: Which is a buy?

With the demand for bookings unlikely to rebound until lockdowns have been lifted and some social distancing measures have been relaxed, Uber has piloted new delivery services (Uber Direct and Uber Connect) that it hopes can offset a fall in revenue. It has also recently secured an $810m federal contract. Both bits of news will help attract investors back to the stock. 

Even with both companies announcing wider losses than expected, both should perform well in the long run, especially as demand for bookings will undoubtedly increase once lockdowns have been lifted. 

 

 

 

As reported by Barron’s, Wells Fargo analyst Brian Fitzgerald has assigned Uber an overweight rating, setting a share price target of $41, down from $45. Two-thirds of Uber’s cost structure is variable, which will help to absorb plummeting revenues, he argued. 

In total, Uber currently has 45 ratings with a consensus share price target of $44.54. Of these ratings, according to MarketBeat, eight analysts have assigned a hold and 37 have assigned a buy. 

Lyft, meanwhile, has 41 ratings with a consensus share price target of $54.47. Thirty analysts have assigned a buy, nine a hold and two a sell. 

 

 LyftUber
Market Cap$8.704bn$57.256bn
EPS (TTM)-6.25-6.66
Operating Margin (TTM)-51.63%-60.48%
Quarterly Revenue Growth (YoY)23.20%14.30%

Lyft & Uber share price vitals, Yahoo Finance, 14 May 2020

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