Unlike its rival Uber,
crash happened in Hemingway fashion: Gradually, then suddenly.
Both carriers’ shares were down about 46% in the past year ahead of their first-quarter earnings reports, weighed down by broader tech selling as the transportation recovery appeared to be unfolding at a much faster pace. slower than many investors had hoped. .
But the wheels fell off for Lyft on Tuesday. Its shares lost more than a quarter of their value in after-hours trading following an earnings report that showed a sequential decline in active passengers, ride-sharing demand still far from recovered in some major cities and additional investment in the supply of drivers needed.
Additional investments, including in the driver supply, led to an adjusted earnings before interest, tax, depreciation and amortization outlook for the second quarter of just $10 million to $20 million, or more than $60 million of less than Wall Street expected at the midpoint. In a market that recently shifted from valuing growth at all costs to valuing earnings, a weaker-than-expected bottom line was particularly alarming. If Tuesday’s after-hours reaction holds up in Wednesday’s trading, it will mark its worst single-day trade loss on record.
Lyft’s comment was so bad that Uber Technologies upped its earnings release and conference call after seeing its own shares trade strongly sympathetically. In a report that was previously scheduled for Wednesday after the market closed, Uber rushed to reassure its investors on Wednesday morning that it would not need significant additional incentive investments to maintain its own driver supply. in good health. And while Lyft said its ridesharing volume was still only about 70% recovered from fourth-quarter 2019 levels, Uber said travel for its mobility business was “nearing full recovery” by compared to 2019, while its gross mobility bookings had already exceeded pre-pandemic levels.
Citing recent trends, Uber also said it expects its mobility arm to post seasonally better growth in the second quarter, with the company’s total adjusted EBITDA slightly above Wall Street forecasts in the second quarter. middle of his outlook.
Uber CEO Dara Khosrowshahi said on Wednesday that his company was “very aware” of the high value markets place on companies generating and increasing profits, noting that the benefits of its platform, among others, could generate competitive advantages and sustainable growth.
There are two main reasons why Uber might be in a better position when it comes to driver supply right now. The first is that Uber’s multiple verticals are more attractive to drivers. Uber said Wednesday that its multi-product platform strategy differentiates itself from the competition not only for consumers but also for drivers, “who can drive, deliver or shop,” all in one app.
More likely, however, Uber simply paid more last year to make it more attractive. Recall last year, Lyft said its investments to increase driver supply would create a first-quarter revenue headwind of just $10 million to $20 million. Uber, meanwhile, cited an expected investment of $250 million during the year, albeit on a much higher revenue base.
As for potential future expenses, it should be noted that there are also downsides to being the Uber of all things everywhere. Uber had an entire segment of its conference call script dedicated to regulatory “advances,” dealing with various labor laws around the world, some of which do not accept the notion of drivers as independent contractors as has been permitted for gig businesses in the United States. the financial risk of reclassification, legal and campaign costs in the United States alone were hardly inconsequential.
In the race for sustainable earnings, this week’s results could be an isolated boost for Uber which has been stagnant as the year progressed; or it could finally be the start of the longer-term validation that Uber has always sought.
Maybe Lyft just wasn’t hungry enough.
Write to Laura Forman at [email protected]
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