In the battle of Lyft vs. Uber, who is winning? One investor says it’s the underdog.
Times are tough for ride-hailing service Uber Technologies (Uber Technologies Stock Quote, Chart, News NYSE:UBER), once considered the paradigm of tech disruptors.
The knock these days is that the company’s losses, growing every quarter, are scaring away investors, even as Uber looks to expand into other jurisdictions and other sectors of the marketplace.
Count John O’Connell of Davis Rea among the skeptics.
Uber loses money on every ride…
“They lose about 25 cents for every ride [and] their situation in North America is getting worse from a ride perspective,” says O’Connell, chairman and CEO of wealth management company Davis Rea, who spoke to BNN Bloomberg on Tuesday.
“It’s a wonderful service. I just think that we’re getting to a period of time with investors —and we’re seeing this with WeWork where people are deriding the prospectus— where they’re saying, ‘I want to see these guys make money,’” he says.
Uber delivered its second quarter results earlier this month, missing analysts’ estimates for both revenue and earnings. Shares tumbled on news that the company’s top line of $3.17 billion was less than the expected $3.36 billion and its EPS of $4.72 per share was larger than the expected $3.12 per share. (All figures in US dollars.)
The company reported a staggering net loss of $5.24 billion, although much of that was due to stock-based compensation, while its core ride-hailing segment saw revenues of $12.19 billion, better than the consensus estimate of $12.11 billion.
Uber’s share price has trailed off since its much-hyped initial public offering in May, with the stock now down 22 per cent overall. Uber’s main competitor in North America, Lyft (Lyft Stock Quote, Chart, News NASDAQ:LYFT), also IPO’d this year but it too has been trending lower, now down 26 per cent overall.
CEO Dara Khosrowshahi insisted that profitability was not a problem for Uber, saying that getting into the black is just around the corner.
“We think that 2019 will be our peak investment year and we think that 2020, 2021, you’ll see losses come down,” said Khosrowshahi to CNBC on August 9. “I think our break even is something that we can push the company to break even if we really wanted to frankly.”
Lyft vs. Uber, who is winning?
But O’Connell says the company may be spread to thin, especially in comparison to Lyft.
“In North America, Lyft is doing a better job than Uber,” O’Connell says. “Uber is fighting a battle on a global front and they’ve got these other investors and they’re fighting too many battles in too many different markets. In a world where money is free and people don’t care if you make a profit or not the chances of competitive pressures are very high and so the ability to withstand that and have investors that are going to continue to fund that is difficult.”
“The trick is that they have to do a better job —and they are doing a good job— with the Uber Eats side, which is where I think that the opportunities lie, because they’ve got to keep those drivers happy and occupied and productive,” he said.