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? Read on for a complete analysis of Uber vs Lyft Stock.
Company History of Lyft & Uber
- The Uber vs Lyft stock rivalry goes back a long way. Both companies were started close to the same time and due to very 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 also couldn’t find a cab in 2009.
The first tripfor Uber was in July of 2010 in San Francisco and 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 around the world!
Besides the ride-hailing business, Uber has been building out several other businesses, including UberEats (launched in 2015) and Uber Freight (launched in 2019).
They're also investing heavily in self-driving vehicle technology, with a pilot program launched in September of 2016 in Pittsburgh, PA.
Kalanick remained the CEO until June of 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.
1. Getting a Lift from Lyft
- Lyft was originally launched as a service within Zimride in 2012. The following year the company changed their 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 made investments 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, who led them to their IPO on March 29th, 2019, at $72/share.
2. Uber vs Lyft Stock Financials
Uber is a much larger company than Lyft with a market cap of around $57 billion and 2019 sales just over $14 billion. Lyft is currently worth around $10.5 billion after $2.8 billion of sales last year.
Both companies have plenty of cash on their balance sheets and enough liquidity to continue operating in the near term. And both have debt to income ratios of just a little more than 1; which is definitely acceptable for companies in fast growth mode.
Lyft actually had no long-term debt until they acquired Flexdrive in February, and brought on their $103 million in debt.
The major issue with both Uber and Lyft is that they lose massive amounts of money. In fact, 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 they 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; which was 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 actually 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. UberFreight is also growing rapidly, but only had $731 million in sales last year.
3. Headwinds for Uber and Lyft Stock
Uber and Lyft have both faced a tremendous amount of controversy over the course of their lifetime. In fact, it’s a good bit more than I can get into in this blog post. I’ll mention them briefly so you know what you should watch out for in these names.
Early on, the biggest push back came from taxi companies and groups, who saw their business model suddenly upended. These are powerful groups that made in 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 putting riders’ lives in danger. This naturally called into question the vetting process for becoming and 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 to these important public services.
A major battle currently underway is around “California AB5,” which went into effect January 1st of this year. Commonly called the “gig-worker bill,” the bill attempts to make companies like Uber and Lyft, who hire large number of independent contractors, to hire them as employees.
This would provide gig-workers with minimum wage protections and give them access to employers sponsored benefits like healthcare.
While it's still unclear how this will shake out in the courts, Uber has made some adjustments to how they treat their drivers.
Like guaranteeing a minimum earnings standard and providing subsidies for healthcare. Make sure to take our trading courses.
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 all the way down to an all time low of $13.71.
It's recovered from there, although recent fears of a “second wave” has it in a new down trend. 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 out 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.
If you want to know more than technical analysis on Uber vs Lyft stock, you can look up their fundamental analysis.
These two companies are major industry disruptors led by extremely talented managements, which makes for a great long-term investment thesis.
However, their near term results are hazy at best. I think 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 that you can buy and forget. You must continue to do the work to monitor them and make sure then achieve profitability sooner than later, and that they continue growing for many years to come.
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 in the comments your thoughts on Uber vs Lyft stocks!