Uber vs Lyft Stock are fierce competitors trying to disrupt the transportation industry. They even had their IPOs within 45 days of each other. Both stocks have struggled since then, with Uber down about 22% from its IPO price and Lyft a little more than 50%. But which is the better bet for the long term?
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Uber vs Lyft Stock Introduction
The Uber vs Lyft stock rivalry goes back a long way. Both companies were started close to the same time and for similar reasons. Lyft was originally Zimride. Which was to be a long-distance carpooling service that founders Logan Green and John Zimmer came up with after they couldn’t find a ride in 2007. Uber’s founders, Travis Kalanick and Garrett Camp started Uber Cab after they couldn’t find a cab in 2009.
The first trip for Uber was in July of 2010 in San Francisco, and they booked their one billionth trip in December of 2015. Uber booked 1.66 billion trips in the first three months of this year, operating in over 600 cities in 65 countries worldwide!
Besides the ride-hailing business, Uber has been building several other businesses, including UberEats (2015) and Uber Freight (2019).
They’re also investing heavily in self-driving vehicle technology, launching a pilot program in Pittsburgh, PA, in September 2016.
Kalanick remained the CEO until June 2017, when he was pressured to resign over a sexual harassment scandal in upper management. He’s still on the board of directors, however.
Kalanick’s replacement is Dara Khosrowshahi, formerly the CEO of Expedia. Uber’s long-awaited IPO came on May 10th, 2019, at $45/share.
$UBER research report provided by StockRover – please note this research report is dated June and needs to be re-reviewed directly at StockRover for the latest data!
Getting a Lift from Lyft
- Lyft was originally launched as a service within Zimride in 2012. The following year, the company changed its official name to Lyft and sold Zimride to Enterprise Holdings.
- Lyft has been more focused in its approach, operating only in the US and Canada and not straying far from ride-hailing except for small businesses in scooter and bike rentals. They’ve also invested in self-driving vehicles, although both companies have been scaling back spending in this area during this difficult period brought on by COVID-19.
- Logan Green is still the CEO of Lyft, which led them to their IPO on March 29th, 2019, at $72/share.
Company Financials
Uber is a much larger company than Lyft, with a market cap of around $57 billion and 2019 sales over $14 billion. Lyft is worth around $10.5 billion after $2.8 billion in sales last year.
Both companies have plenty of cash on their balance sheets and enough liquidity to continue operating soon. And both have debt-to-income ratios of just a little more than 1, which is acceptable for companies in fast growth mode.
Lyft had no long-term debt until they acquired Flexdrive in February, bringing on their $103 million debt.
The major issue with Uber and Lyft is that they lose massive amounts of money. Their losses have been growing. Uber lost 8.5 billion dollars last year, and Lyft lost $2.7 billion.
They do realize that they will need to show profits soon. Their stock prices have been suffering since going public. Uber and Lyft have eased up on promotional pricing and have focused on getting to unit profitability.
Uber had announced it expected to be profitable by Q4 of this year. However, the coronavirus epidemic may push that back a bit. Lyft isn’t expecting profits until late 2021.
Uber’s fastest-growing segment has been UberEats, up 72% year over year in the first quarter of this year. However, there is a lot of speculation about this business and whether it can ever be profitable.
Lyft isn’t exposed to this business, but the competition is fierce between UberEats, DoorDash, GrubHub (which Uber recently tried to acquire but lost the bid to the European company “Just Eat Takeaway”), and PostMates.
UberEats contributed $2.56 billion in sales in 2019. Uber Freight is also growing rapidly but only had $731 million in sales last year.
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Headwinds for Uber and Lyft Stock
Uber and Lyft have both faced a tremendous amount of controversy throughout their lifetime. It’s a bit more than I can get into in this blog post. I’ll mention them briefly so you know what to watch out for in these names.
Early on, the biggest pushback came from taxi companies and groups, who saw their business model suddenly upended. These powerful groups made it difficult for Uber and Lyft in the early days, especially in New York City.
There’ve also been several instances of drivers committing crimes and risking riders’ lives. This naturally called into question the vetting process for becoming an Uber or Lyft driver.
Another concern has been around increased congestion in cities and less use of public transportation systems, which would cause financial pressure on these important public services.
A major battle is “California AB5,” which went into effect on January 1st of this year. Commonly called the “gig-worker bill,” the bill attempts to make companies like Uber and Lyft, who hire large numbers of independent contractors, hire them as employees.
This would provide gig workers minimum wage protections and employer-sponsored healthcare benefits.
While it’s still unclear how this will shake out in the courts, Uber has adjusted how they treat their drivers.
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Uber vs Lyft Stock Technical Analysis
Uber had rallied at the beginning of the year to near its IPO price before the pandemic sell-off brought it down to an all-time low of $13.71.
It’s recovered, although recent fears of a “second wave” have it in a new downtrend. I see it trading in a range, with support around $28 and resistance around $37.
Lyft’s early-year rally didn’t get it as close to its IPO price, topping around $54 before plunging to $14.56.
It also looks like it might have more near-term downside than Uber. However, there should be some support at $30. Resistance in the near term will be around $41/share.
You can look up their fundamental analysis if you want to know more than technical analysis on Uber vs Lyft stock.
Final Thoughts
These two companies are major industry disruptors led by extremely talented managers, which makes for a great long-term investment thesis.
However, their near-term results are hazy at best. Either could be a good long-term hold for a patient investor with ice in their veins.
But these aren’t the kinds of companies you can buy and forget. It would be best if you continued to do the work to monitor them, ensure they have profitability sooner rather than later, and continue growing for many years.
If I had to take just one, I’d take Uber, as it’s a larger company with more levers to pull for growth over the next several years. Let us know your thoughts on Uber vs Lyft stocks in the comments!
