Lyft’s share price pulls a U-turn following Toyota’s Level 5 purchase

As of 3 May, Lyft’s [LYFT] share price has gained 16.2% so far in 2021, closing at $57.08. Despite the decimation of the ride-hailing company’s business during the coronavirus pandemic, Lyft’s share price almost doubled in the past 12 months (through 3 May), climbing 67.6%.

Lyft’s share price registered its best performance so far in 2021 on 19 March, when it climbed 35.5% for the year to date to close at $66.56, but it has pulled back since. The stock dropped 1.5% following the announcement on 27 April but has since recovered slightly.

Meanwhile, Toyota’s [TM] share price was down 1.5% so far this year to 3 May, when it closed at $152.23. This was in spite of a similar February surge that saw its share price grow 11.4% during the month’s opening fortnight.

Toyota’s share price went on to suffer steep losses in late February and early March — the stock was down 3% in the year to 19 March, closing at $158.58. While Toyota’s share price had grown 25.7% in the past 12 months (through 3 May), it had underperformed the S&P 500, Dow Jones Industrial Average and Nasdaq during the period.

While Lyft’s share price growth in the past 12 months outpaced that of the Nasdaq and S&P 500, the company has experienced falling sales and increasing losses.

In an effort to shore up capital, Lyft made a recent move aimed at steering its business towards profitability.

Lyft offloads Level 5

Lyft has become the latest company to ditch efforts to develop its own driverless cars. This capital-intensive ambition has already proven too costly for the likes of Uber to achieve outright and is even spooking Tesla [TSLA].

Instead of start-ups like these, the drive towards autonomous vehicles is set to be powered by established automotive powerhouses such as Ford [F], Volkswagen [VOWG], Volvo [VOLV-B] and Honda [7267].

Toyota, meanwhile, has acquired Lyft’s driverless car group Level 5 for $550m through subsidiary Woven Planet Holdings. The deal includes a $200m up-front payment, while the remainder will be paid over five years.

Level 5’s 300-plus employees will join Woven Planet, bringing this division’s headcount up to circa 1,200. James Kuffner, CEO of Woven Planet, said that “Bringing Level 5’s world-class engineers and experts into the fold — as well as additional technology resources — will allow us to have even greater speed and impact.”

“Bringing Level 5’s world-class engineers and experts into the fold ... will allow us to have even greater speed and impact.” - James Kuffner, Woven Planet CEO

The deal will see Lyft better-positioned to turn a profit, having seen revenues tumble in the wake of the coronavirus pandemic. The number of active rider growth decreased 60.1% year over year in the three months ended 30 June 2020, 43.9% in the three months ended 30 September and 45.2% for the three months ended 31 December. The company reported that revenue for 2020 had decreased 35% year over year to $2.4bn.

The sale of its self-driving unit is expected to save $100m of non-GAAP expenses per annum. Despite the grave appearance of Lyft’s numbers for Q4 2020, the earnings announcement saw a jump in Lyft’s share price in the days following as many analysts had feared worse.

Self-driving car specialists like Aurora Technologies, which acquired Uber’s autonomous vehicle arm and $400m funding from the ride-hailing firm in December 2020, are still in the game. Besides the big automotive companies and Woven Planet, competition comes from tech giants such as Google’s [GOOG] Waymo, which bought Latent Logic in December 2019, and Apple [AAPL], which purchased struggling autonomous vehicle start-up Drive.ai in June 2019.

All HAIL DRIVerless

The autonomous vehicle space is experiencing a strong trend towards consolidation as the technology nears maturity and commercial viability. It is also coming of age contemporarily, with major tailwinds for the electric vehicle (EV) market.

Both Toyota and Lyft are held in the SPDR S&P Kensho Smart Mobility ETF [HAIL]. Lyft was the twelfth-largest holding as of 3 May, weighted at 2.15%. The fund has gained 10.1% so far in 2021 to 3 May’s close, and 155% over the past 12 months.

Toyota, however, was 41st on the ETF holdings list as of 3 May, weighted at 1.49%, but was the sixth-largest holding on the Global X Autonomous & Electric Vehicles ETF [DRIV]. The stock, weighted at 2.68%, was the only automotive stock in the ETF’s top 10 holdings as of 3 May, while Lyft was not included in its holdings. The fund offers investors exposure to driverless car giants like Alphabet and Apple, neither of which are held by SPDR S&P Kensho Smart Mobility ETF.

The Global X Autonomous & Electric Vehicles ETF has performed well in the past few months, climbing 12.3% so far this year to 3 May, and 122.7% in the past 12 months.