Get 40% Off
🚨 Volatile Markets? Find Hidden Gems for Serious OutperformanceFind Stocks Now

Lyft shares skid on fears Uber pulling ahead

Published 02/10/2023, 05:53 AM
Updated 02/10/2023, 04:30 PM
© Reuters. FILE PHOTO: A sign marks a rendezvous location for Lyft and Uber users at San Diego State University in San Diego, California, U.S., May 13, 2020.      REUTERS/Mike Blake

By Akash Sriram and Aditya Soni

(Reuters) -Lyft Inc lost more than a third of its market value on Friday after a bleak forecast fueled worries that the company's price cuts to avoid being a distant second to Uber (NYSE:UBER) in the North American ride-sharing market would squeeze profits.

Analysts said any pickup in ride volumes at Lyft (NASDAQ:LYFT) would not be enough to offset lower prices.

The two companies have been locked in a battle for market share coming off the pandemic lows, with latest earnings showing Uber's global presence and more diversified business were giving it an edge over rideshare and U.S.-focused Lyft.

"Uber benefits from having a global rideshare model, and international markets have been quicker to bounce back than the United States," said Nikhil Devnani, analyst at Bernstein.

"As the bigger platform Uber is able to offer more volume for drivers, not only within rideshare, but also now with (food and grocery) delivery."

Lyft shares hit their worst day on record after closing 36.4% lower, with 13 analysts lowering their price targets on the stock. The sell-off erased over $2 billion in the company's market value and nearly all of its share price gains this year.

Lyft on Thursday provided first-quarter profit and revenue forecasts that were below market expectations, a stark contrast to Uber's strong profit projection and better-than-expected earnings.

"This outlook continues the recent trend of Lyft growing slower than the broader rideshare market," Canaccord Genuity said, adding that improving driver supply will pressure the company's pricing.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads .

Drivers have returned to ride-sharing companies in recent months as they look for a consistent income stream in a weak economy, allowing Uber and Lyft to cut back on incentives.

Driver supply at Lyft in the fourth quarter was at the highest level since before the pandemic in 2019, while Uber's driver supply was at a record high.

But the higher supply means that Lyft will see lesser surge pricing in the first quarter, which will hit its revenue.

The company lowered prices in January after Uber dropped its fuel surcharge earlier that month, and analysts said Lyft's larger presence on the U.S. West Coast was also a drag as many technology companies there have not returned to office.

"Lyft is making the difficult trade off to lower price in order to help conversion and prevent further share loss to Uber," brokerage Needham said.

"Despite the constructive commentary on demand, we do not assume volume will be able to offset lower prices."

Lyft said in November it will lay off 13% of its workforce in a bid to cut costs. Uber has so far avoided such a move.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.