Wall Street's Identity and Brand Crisis With Lyft and Uber
Choosing between Lyft Inc. (NASDAQ: LYFT) and Uber Technologies Inc. (NYSE: UBER) apparently is not quite the coin toss that some ride-hailing consumers might have guessed. At least that’s what Wall Street’s reaction was to each of their second-quarter earnings reports. Lyft shares rallied strong on Thursday in reaction to its earnings report the prior evening, and while Uber rallied with Lyft, it gave back its gains and then some on Friday after its report.
While the earnings summaries have been expanded for each, there are other issues to consider around new hot post-IPO companies. Wall Street’s analyst community is one such concern. Another is that these remain under their respective initial public offering prices.
Uber generated a $3.2 billion in revenues, but including $3.9 billion in expenses around its IPO and stock-based compensation, the ride-sharing service lost a whopping $5.2 billion in the quarter. Even backing out the items, Uber’s adjusted earnings per share (or losses) and revenues were not showing as much growth as the investing community was demanding. To put that loss in perspective, that’s more than twice the $2.26 billion loss that the U.S. Postal Service generated.
- Raymond James reiterated Uber as Outperform and raised the target price to $54 from $50.
- Morgan Stanley reiterated it as Overweight and raised the price target to $57 from $56.
- Loop Capital reiterated its Buy rating and $54 target.
- Evercore ISI reiterated its Outperform rating with a $60 target.
- Canaccord Genuity reiterated the stock as a Buy with a $55 price target.
- Citigroup and Susquehanna both maintained Neutral ratings on Uber, with Citi’s target at $45 and Susquehanna’s at $42.
Uber’s stock had been down more than $4.00 and under $39.00 earlier on Friday morning, but the shares closed down $2.93 (−6.82%) at $40.05 on Friday. Uber’s IPO price had been at $45.00 per share.
When Lyft reported earnings, it posted a net loss of $2.23 per share and $867.26 million in revenue. The Refinitiv consensus estimates called for a net loss of $1.58 per share and $809.27 million in revenue. The same period of last year had an $8.48 per share net loss and revenue of $504.91 million. During the quarter, active riders increased 41% year over year to 21.81 million, up from 15.45 million. Revenue per active rider was up 22% to $39.77 from $32.67.
- Canaccord Genuity reiterated Lyft as Buy and raised its target price to $78 from $75.
- Atlantic Equities upgraded the shares to Neutral from Underweight.
- Wedbush Securities raised its rating to Outperform from Neutral and its target to $75 from $67.
Lyft shares had risen 3% to $62.10 on Thursday in reaction to its earnings, but its stock had also been up 2.7% ahead of earnings well. Lyft shares ended down nearly 5% at $59.12 in Friday’s trading. Lyft’s IPO price was at $72.00 per share.
All in all, there were not as many downgrades as one might have expected, and the Uber clouds pulled Lyft back down basically to where it was trading before its earnings beat. Sometimes Wall Street just can’t make up its mind on a collective basis.