Lyft shares skid on fears Uber pulling ahead

Lyft Inc misplaced greater than a 3rd of its market worth on Saturday after a bleak forecast fueled worries that the corporate’s worth cuts to keep away from being a distant second to Uber within the North American ride-sharing market would squeeze income.

Analysts mentioned any pickup in journey volumes at Lyft wouldn’t be sufficient to offset decrease costs.

The two corporations have been locked in a battle for market share coming off the pandemic lows, with newest earnings displaying Uber’s world presence and extra diversified business have been giving it an edge over rideshare and US-focused Lyft.

“Uber benefits from having a global rideshare model, and international markets have been quicker to bounce back than the United States,” mentioned 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 document after closing 36.4% decrease, with 13 analysts reducing their worth targets on the inventory. The sell-off erased over $2 billion within the firm’s market worth and almost all of its share worth beneficial properties this 12 months.

Lyft on Thursday offered first-quarter revenue and income forecasts that have been under market expectations, a stark distinction to Uber’s robust revenue projection and better-than-expected earnings. “This outlook continues the recent trend of Lyft growing slower than the broader rideshare market,” Canaccord Genuity mentioned, including that enhancing driver provide will stress the corporate’s pricing.

Drivers have returned to ride-sharing corporations in latest months as they search for a constant revenue stream in a weak economic system, permitting Uber and Lyft to chop again on incentives.

Driver provide at Lyft within the fourth quarter was on the highest degree since earlier than the pandemic in 2019, whereas Uber’s driver provide was at a document excessive.

But larger provide signifies that Lyft will see lesser surge pricing within the first quarter, which can hit its income.

The firm lowered costs in January after Uber dropped its gas surcharge earlier that month, and analysts mentioned Lyft’s bigger presence on the US West Coast was additionally a drag as many expertise corporations there haven’t returned to workplace.

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

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

Lyft mentioned in November it’ll lay off 13% of its workforce in a bid to chop prices. Uber has up to now averted such a transfer.

Stay on high of expertise and startup news that issues. Subscribe to our every day publication for the most recent and must-read tech news, delivered straight to your inbox.