If you’re a fan of (or more importantly an investor in) ridesharing services, this is a week to make sure that you’re awake at the wheel. Lyft (NASDAQ:LYFT) reports its fourth-quarter results shortly after the close on Tuesday. Larger rival Uber Technologies (NYSE:UBER) pulls over for its fresh financials the following day.
Lyft and Uber seem to be joined at the hip in the eyes of Wall Street. They are the two undisputed leaders in the U.S. car-hailing market. They also went public just five weeks apart in the springtime of 2019. But pop open the hoods, and you’ll find two different engines in action. Lyft will take some time to warm up in the new normal, but Uber should impress you.
Lyft you higher
Lyft was the first of the two ride-hailing platforms to go public, and since it reports first this week, we may as well start there. The pandemic has naturally hit the personal mobility market hard. With more people working, learning, and playing at home in an effort to contain the spread of the COVID-19 virus, demand has dropped sharply since mid-March of last year.
As the smaller of the two players, Lyft stood out when it hit the market by growing a lot faster than Uber. Lyft’s business has also been the harder hit of the two companies on the way down. We’ve seen revenue at Lyft decline 61% in the second quarter of last year, the first full period under the grip of the pandemic. The top line took a 48% year-over-year hit in the third quarter. Analysts see that improving marginally to a 45% decline when it reports on Tuesday afternoon.
The climate is getting kinder, but for now the problem is the temporary pause on conventional ride-pooling. UberPool and Lyft’s shared-ride feature were suspended in March of last year. The ride-pooling was a win-win for the platforms. Riders willing to share a car with others going in the same direction would receive lower fares. Drivers would make more money by lumping overlapping routes in the same vehicle. This doesn’t fly in the new normal, where strangers shouldn’t be sharing the backseat even if they are donning the now-required masks.
The market’s been kind. Despite the brutal year, Lyft shares moved 14% higher in 2020, and the stock enters this trading week 23% higher than where it was at the start of last year. Investors are assuming we will resume our ridesharing ways as the vaccination rollout gnaws away at the pandemic as 2021 plays out. For now, expect another sharp quarterly deficit to accompany the 45% revenue hit on Tuesday.
Investors will get a very different report out of Uber after the market close on Wednesday. It’s expected to follow Lyft in posting a quarterly loss that is narrower than the same period a year earlier, but analysts see a mere 12% decline in revenue.
The difference here is that Uber has emerged as the country’s second largest player in restaurant delivery. We’re not hailing rides these days, but with indoor dining unsafe (if not entirely off the menu), there’s been an explosion in the popularity of third-party apps that pick up takeout orders and bring them to hungry customers.
Uber’s third quarter is a perfect illustration of the state of things. Uber’s 18% decline in revenue for the period — way kinder than Lyft’s 48% slide — was the combination of a 53% drop in passenger rides that was largely offset by a 125% increase for Uber Eats. It works. It’s why Uber stock has trounced Lyft, nearly doubling (up 97%) since the beginning of last year.
It’s not just Uber Eats that is helping the larger of the two players, which now trades at a much higher revenue multiple than Lyft. Uber is an international player, and many overseas markets are closer to bouncing back to pre-pandemic levels. Both stocks should be growing their top lines again at some point later this year, but right now Uber is the one that’s shining brighter than Lyft.