Uber wants to stay ahead of Lyft in the resurgent ride-sharing market

(Reuters) – Uber Technologies Inc’s revenue growth will outpace that of rival Lyft Inc as the ridesharing company’s presence in key markets around the world gives it the leverage to deal with inflationary pressures.

Ridesharing companies are beginning to rebound from pandemic lows as offices reopen and travel picks up again on the back of closed borders reopening and a strong US dollar.

Uber, headed by Dara Khosrowshahi, operates in multiple regions and has built a massive grocery and grocery delivery business over the years, while Lyft has focused primarily on ridesharing services in the United States.

Uber’s larger scale, reflected in a $67 billion market cap nearly 10 times that of its competitor, has also allowed it to spend more on incentives to attract drivers as the industry recovers has flooded ridesharing with demand.

While Lyft was the first company to report earnings since rideshare operations began, investors will now focus on its adjusted core earnings outlook as the companies set big goals for 2024 — $5 billion for Uber and $1 billion -dollars for Lyft.

“Lyft is on the losing side of Uber’s mobility and delivery network effect … in a world where the focus is increasingly on profitability, Lyft doesn’t deliver,” said Michael Morton, an analyst at MoffettNathanson.

Analysts are expecting a 19% increase in revenue for Lyft and 47% for Uber for the fourth quarter, according to Refinitiv data.

Chart: Uber ridesharing revenue growth likely to outpace Lyft – https://www.reuters.com/graphics/UBER-RESULTS/jnpwyxlzepw/chart.png

CONTEXT

Analysts at UBS pointed to data showing that the time drivers spent using the Lyft app had decreased, while the proportion of driver app downloads for Uber increased in the fourth quarter.

“When we look at data on time spent driving on a 2-year growth basis, our concerns that Lyft could lose market share become even greater…we are more concerned about Lyft’s need to invest in incentives,” said a UBS analyst Lloyd Walmsley.

Uber’s grocery and delivery segment, which accounts for more than a third of its revenue, has so far been resilient in the slowing economy but faces risks from a slowdown in consumer spending.

Graphic: Uber versus Lyft – https://www.reuters.com/graphics/UBER-RESULTS/UBER-RESULTS/gkplwdjeyvb/Pasted%20image%201675782673018.png

BASICS

** Analysts expect Uber to report fourth-quarter adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $614.79 million and an adjusted loss of 18 cents per share

**Lyft is expected to report adjusted EBITDA of $91 million, up 22%, and adjusted earnings of 13 cents per share

WALL STREET MOOD

** Fourteen out of 47 analysts give Uber a strong buy rating, 28 a buy rating, and five a hold rating

** Five out of 46 analysts covering Lyft have a strong buy rating, 16 buy, 24 hold and one sell

(Reporting by Nivedita Balu in Bengaluru; Editing by Shounak Dasgupta)

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