After losing around three-quarters of its market value last year,
‘s shares are up almost 47% this month. A close look at the ride-hailer’s fundamentals suggest that kind of rebound hasn’t yet been earned.
Lyft, which historically has been dusted by more global competitor
isn’t suddenly gaining ground. In an initiation report in early January, Jefferies analyst John Colantuoni estimated the ride-hailer ended last year with around 29% U.S. market share to Uber’s 71%. His estimates show Lyft exiting the pandemic in arguably worse shape than it entered it, having lost around 3 percentage points of market share over the last three years.
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What is more, RBC’s latest driver supply analysis across the 10 largest U.S. markets shows a 15% decline in Lyft’s rider-cost-per-hour versus a 7% increase for Uber riders’ cost over the past few months for the same rides. Analyst Brad Erickson chalks that up to Lyft’s attempt to regain share in certain markets through discounting.
A global recession could bring more bad news. Jefferies data shows airport rides are the biggest use case for ride-hailing services in terms of miles driven. Such trips likely would decline if companies pull back on business-travel budgets and consumers put leisure travel on hold. Rides to and from restaurants and bars were ride-hailers’ second highest use case—another bad sign for their businesses if consumers cut back on going out.
Lyft continues to assert that its focus on ride-share eventually will pay off relative to Uber’s more diversified business, which includes food delivery, but there are hidden costs to consider. The Jefferies analysis shows insurance costs alone were nearly 27% of Lyft’s revenue last year versus less than 9% of Uber’s. There are two reasons for this, according to the firm: First, vehicle insurance costs more in the U.S. than it does internationally, where Uber does a significant portion of its business; second, it costs more to insure a car that carries passengers than one that carries food.
U.S. auto-insurance costs have been rising because of inflation and interest-rate increases. Consumer-price index data shows motor-vehicle insurance premiums grew just over 4% year-over-year in January 2022, but by December were more than 14% higher on the same basis.
For Lyft, smaller scale might mean less cash to do things such as pay drivers. Gig-economy drivers can work for more than one platform at once but probably favor rides from the platform that pays the most. RBC’s data shows Uber’s bookings per hour came out about 17% higher than Lyft’s across the 10 major markets it analyzed, with the gap having widened in recent months. The firm warns such structural disadvantage on the driver’s side could lead to long-term share loss for Lyft.
Most of Lyft’s share gains this month look like traders simply hedging their bets. Lyft’s short interest peaked around the end of October,
shows. The subsequent decline in short interest suggests covering into Lyft’s fourth quarter earnings report, due next month.
Lyft’s stock is now fetching around nine times enterprise value to forward earnings before interest, taxes, depreciation and amortization. Uber’s shares command 20 times on that basis, so Lyft’s stock still looks relatively cheap at first blush. But add back in Lyft’s lofty stock based compensation expense—higher on a percentage basis in terms of revenue than almost all of its internet peers—and its shares actually start to look overheated.
Lyft has long been a recovery play. What if this is about as good as it is going to get?
Write to Laura Forman at laura.forman@wsj.com
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