Lyft vs Uber stocks: What’s next for the popular ride-hailing firms?
At first glance, Uber Technologies (UBER) and Lyft (LYFT) share many similarities. Both ride-hailing companies started in San Francisco and revolutionised the taxi market by allowing riders to summon a lift at the touch of a button.
Both companies went public in the spring of 2019, and weathered huge changes in consumer demand as the pandemic hit. This year has so far seen both companies worried by the impact of rising fuel prices on ride costs and the squeeze placed on consumer finances by soaring inflation rates.
But there are significant differences between Uber and Lyft. Firstly, the size. Uber has a market capitalization (market cap) of $48.79bn and controls over 70% of the US ride hailing market. Lyft, with its more modest market cap of $6.93bn, has 29% of market share.
Uber also operates globally and is increasingly powered by its delivery business. In fact, the company saw more bookings for delivery services than it did for passenger trips in the first quarter of 2022. Lyft is US and Canada based, with revenue driven by rideshare and vehicle hire.
As demand begins to return to normal after two years of pandemic restrictions, is Uber or Lyft stock, if any, better placed to withstand a challenging macroeconomic climate? What do analysts think about the future of the ride-hailing industry longer term? Here we take a look at the key differences and similarities between the rivals.
Uber stock price
Price performance analysis: Uber vs Lyft
Uber went public on the New York Stock Exchange (NYSE) to great fanfare in May 2019, pricing its initial public offering (IPO) at $45 a share. But, by the end of the first day’s trading, prices had fallen by 11%, making it the biggest one-day dollar loss in history.
This bumpy ride continued over the course of 2019 as Uber continued to report losses from operations in its quarterly releases. After briefly rallying in early 2020, Uber stock performance was affected by the huge changes in demand brought about by pandemic restrictions. Between 21 Feb and 20 March 2020, the Uber share price fell to an all-time low of $21.33 – a drop of almost 50%.
The Uber share price remained depressed until October 2020, when optimism about vaccine developments and a Californian ruling that drivers could be classified as contractors not employees triggered a bull run. The share price recovered its IPO level, and hit $54.86 by December 2020. It went on to reach a record high of $63.18 on 10 February 2021.
April 2021 saw Uber announce a stimulus package to try and entice new drivers, and the share price dipped as investors worried about the impact of driver shortages. The price continued to fluctuate over 2021, with growth frustrated towards the end of the year as rising cases of the Omicron variant of Covid-19 caused disruption.
In March 2022, Uber announced the addition of a fuel surcharge to help drivers manage the burden of higher fuel prices. First-quarter results were announced on 4 May and Uber reported growing mobility revenue but disappointing earnings per share (EPS). The share price dipped to $26 upon release.
Lyft edged ahead of Uber, coming to market in March 2019. The company set its IPO price at $72, but stock initially traded at $87.24 – over a 20% increase. Shares ended the first day of trading at $78.29, but have never regained those highs.
The share price fell over the course of 2019 as investors were frustrated by a lack of profitability, but rallied in October 2019 as positive third-quarter results saw net losses falling and revenues growing.
The share price juddered in February 2020 as investors were disappointed by a lack of guidance on when Lyft hoped to turn a profit. As the pandemic hit, the share price tumbled further, slumping almost 60% between 7 Feb and 20 March 2020, when it reached a record low of $21.27.
As with Uber, October 2020 saw increased optimism and Lyft stock performance improved, with shares starting 2021 close to $50. The share price rose in response to relatively resilient Q4 results released in February 2021, but dipped as more disappointing Q2 results were announced in August 2021. Yet more volatility was yet to come – Lyft released Q1 2022 results on 3 May and the share price fell 27%.
By 9 May 2022, Uber shares had generated a year to date return of -47.55%; the figure for Lyft was an even gloomier -58.26%. Both companies have seen significant share price dips since their 2019 IPOs, with Uber shares down 44.55% and Lyft by 76.23%.
Company fundamentals: Uber vs Lyft
Both Lyft and Uber’s results showed signs of post-pandemic recovery. In terms of Uber vs Lyft revenue, Uber saw numbers more than double year-on-year to $6.9bn. Lyft reported Q1 revenue of $875.6m, up from $609m in the first quarter 2021 – a more modest 44% increase year-on-year.
The majority of Uber’s revenues were generated by delivery services, which represented 52.5% of total revenues for the quarter. Lyft’s revenues, on the other hand, were entirely mobility driven.
Despite rising revenues, both companies reported a net loss. Uber posted a $5.6bn loss related to equity investments, while Lyft reported a net loss of $196.93m, down from $427.3m in the same quarter a year ago.
This resulted in disappointing EPS figures for both companies. Uber’s net loss per share of -$3.03 missed the analysts’ consensus of -$0.23 EPS, while Lyft’s EPS of -$0.57 failed to meet analysts’ expectations of -$0.26.
In terms of the Uber stock outlook, the firm anticipated gross bookings of $28.5bn-29.5bn, and EBITDA of $240-$270m for Q2 2022. For the second-quarter Lyft stock outlook, the company expected revenue of $950m to $1bn and EBITDA of $10bn-$20bn.
According to research company Zacks, Lyft has a price-to-book value of $4.84, compared to Uber’s lower $2.98. Lyft has a trailing twelve-months price to earnings (P/E) ratio of 136.73, against Uber’s P/E of 42.74. Both are significantly above the Zacks Internet Services Industry P/E average of 16.7.
Uber and Lyft both used results releases to reassure investors that driver shortages were coming under control.
Uber’s first-quarter earnings call revealed that active drivers in the US and Canada were up 70%. In an apparent dig at Lyft, Uber CEO Dara Khosrowshahi also suggested that Uber’s ability to provide its drivers with work across both Uber Eats and Uber Rides platforms provided a “structural advantage from what we can see versus the competition locally and then we think ultimately, globally”.
Nevertheless, Lyft revealed that driver activations were also up 40% year-on-year. But higher gasoline prices were starting to bite, with drivers spending $0.61 more on fuel per hour than they did in March 2021.
Should you invest in Uber or Lyft?
When it comes to Uber vs Lyft stocks, Morningstar’s Ali Mogharabi was bullish on both companies, despite their recent share price dips. In a 4 May note, he stated that “in our view, the market’s reaction to Lyft’s guidance is not warranted. We continue to view both Lyft and Uber as attractive investments.”
In a separate 5 May note Mogharabi also stressed the strong influence the rivals can exert on each other's share prices: “With the market disappointed with guidance from peer Lyft, Uber’s shares have been dragged lower despite the firm’s solid first-quarter results and second-quarter guidance. We view narrow-moat Uber as an attractive investment.”
Hargreaves Lansdown’s Susannah Streeter was less optimistic, identifying a number of bumps in the road ahead for both companies. In a 4 May note, Streeter stated: “The labour crunch has turned from a headache into a severe migraine for Lyft as it faces an uphill battle in the big fight to attract drivers back into its ranks.”
Streeter noted that UberEats had increased retention of Uber drivers, meaning that “there has been some relief among investors that for now Uber isn’t in the same vulnerable position as Lyft in having to offer steep incentives to lure drivers back”.
Nevertheless, Streeter explained that Uber’s more diversified structure presented its own vulnerabilities, adding: “Uber still has plenty of regulatory road bumps to navigate in countries around the globe, not least over its reliance on the gig economy, so it is still set to face labour challenges ahead which could eat into its profits prospects.”
It’s worth noting that analysts’ predictions are frequently wrong, and forecasts are no substitute for your own research. Keep in mind that the decision to invest in any stock, including Uber and Lyft, should only be based on your own research. Note that past performance is no guarantee of future returns, and never invest or trade money you cannot afford to lose.
The future of mobility
The question on investors’ lips remains: are Uber and Lyft worth investing in, and what factors will shape their stocks’ future price? A closer look at the ride-hailing industry may provide some answers.
The ride-hailing industry is certainly ripe for revolution, with a 2019 Equity Research briefing from Goldman Sachs on the Future of Mobility stating that “the way people get around is poised to change more in the next decade than any time since the invention of the automobile”.
According to the report, there is significant scope for growth in the mobility industry over the long term thanks to a large total addressable market (TAM), but there are also uncertainties.
“While we see new mobility as a massive long-term opportunity, the path to reaching it is far from a straight line. We see the long-term leadership in the space as far from settled,” said the report.
“Near term, competition, regulation, rising labour costs and macro issues all stand out as major risks, while longer term technology developments could serve to alter market growth and competitive positioning.”
In the short term, the report also identified that “to ultimately revolutionise the way consumers move from point A to point B, we believe ride-hailing companies will need to transform their core product into a utility from a luxury good.”
But with inflation rising, will consumers continue to view Uber and Lyft as necessities? Hargreaves Lansdown’s Streeter explained that “the niggling worries are still there that as the cost-of-living squeeze intensifies and as savings are eaten away, there may be less appetite to pay for an easier life”.
“That could prove a big bump in the road for companies like Lyft and Uber to navigate as they also try and swerve the competition being posed by new instant delivery start-ups like GoPuff and Getir.”
With rising fuel prices increasing the costs of rides and consumer budgets squeezed by inflation, the future path of Uber and Lyft stocks could be bumpy.
Note that estimates can be wrong. Analysts’ forecasts are no substitute for your own research. Always perform your own due diligence before you buy or sell a stock as an investment. And never invest or trade money you can’t afford to lose.
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FAQs
Are Uber and Lyft publicly traded?
Uber Technologies is listed on the New York Stock Exchange (NYSE) under the ticker symbol UBER. Lyft is listed on the Nasdaq and trades under the ticker symbol LYFT.
Are Lyft and Uber stocks a good long-term investment?
The ride hailing industry is expected to grow significantly long term according to a 2019 Equity Research briefing from Goldman Sachs on the Future of Mobility, however, there are many uncertainties rooted in elements such as competition, regulation, rising labour costs and macro issues. In volatile equity markets, it’s important to do your own research on a stock to determine if it is a good fit for your investment portfolio. Whether LYFT and UBER are suitable investments for you depends on your risk tolerance, portfolio goals and timeframe, and how much you intend to invest. You should always conduct your own due diligence before trading or investing.
Did Uber buy Lyft?
No. Uber CEO Travis Kalanick confirmed in a later interview that Uber looked into acquiring Lyft in 2014 but negotiations broke down over price.