Ridesharing stocks were surprisingly in the red on Wednesday. While most investors were paying attention to what the Fed would say regarding its policy meeting, the two largest ridesharing companies were some of the day’s worst-performing stocks. Lyft (NASDAQ: LYFT) plunged over 34% after the company reported an alarmingly poor first quarter, while Uber fell simply by association.
Lyft reported $875.6 million in Q1 revenue, a respectable 44% increase compared to last year. However, the number of active riders, around 17.8 million, came in lower than expected. Despite revenues growing, Lyft is still unprofitable after all these years. Q1 net losses were around $196.9 million
Even more concerning for analysts and shareholders, Lyft said that it would need to use subsidies in order to attract more drivers onto its platform, a worrying sign for the company. Many drivers have since shifted to food deliveries following the pandemic. While Uber has a delivery arm, Lyft still doesn’t, and many drivers have still to shift back to ferrying customers again.
Analysts were divided on whether Lyft’s need to subsidize new drivers was a potential red flag for the ridesharing giant or a necessary evil considering the current market climate. Both Uber and Lyft have struggled to grow their network of drivers in recent months.
“The demand story and ridesharing rebound is front and center as the economy reopens and Lyft benefits from this dynamic over the coming year,” wrote Wedbush analyst Dan Ives, who argued the crash in Lyft stock to be an overreaction. “This quagmire of spending to get drivers back onto the platform is a necessary evil to propel the Lyft story into its next stage of growth.”
In contrast, Uber has performed significantly better. The king of ridesharing saw revenues of around $6.9 billion, handily above the $6.1 billion Wall Street expected. However, that didn’t stop the company from also plunging following Lyft’s tough quarter. Shares of Uber were down 9.5% simply by association.
In contrast, Lyft took the full brunt of the selloff. Shares were down over 34%, which proves just how jittery and ready most growth investors are to dump a stock when results don’t match expectations. A lot of this has to do with the high inflationary environment we’re in and the rising interest rates from the Federal Reserve, both of which are creating a sense of worry about popular growth stocks, especially unprofitable ones.
As for Wall Street, we see a mixed reception. Around 25 analysts currently have a buy rating of some kind, while 15 are neutral. That’s much different from Uber, where 40 analysts are bullish, and only four are neutral.
Lyft Company Profile
Lyft is the second largest ridesharing service provider in the U.S., connecting riders and drivers over the Lyft app. Lyft has recently entered the Canadian market, in efforts to expand its market outside of the U.S. Incorporated in 2013, Lyft offers a variety of rides via private vehicles, including traditional private rides, shared rides, and luxury ones. Besides ride-share, Lyft also has entered the bike- and scooter-share market to bring multi-modal transportation options to users. – Warrior Trading News