When it comes to on-demand transportation, Uber and Lyft are clear leaders of the market. Here is the breakdown of both companies and which is the better buy.
Current Price: $32.30
52/Wk High: $41.86
52/Wk Low: $13.71
Current Price: $29.52
52/Wk High: $54.50
52/Wk Low: $14.562
Read below for the breakdown! 🚀
When many think about quick transportation through a digital platform their first instinct is of course Uber and the popular transportation system is arguably one of the future.
Uber currently operates in several business areas through its digital applications. $UBER does not only offer rides place to place but is also involved in food delivery and freight as well as several other investments.
According to the Q2 earnings report earnings took a major hit, but some segments continued to grow. Digging into the revenue segments, total net revenue was down huge, dropping from $3.256 billion in Q1 of 2020 to $1.918 billion in Q2 of 2020.
Not only that, but the core business of $UBER, the mobility segment, took a devastating 67% revenue hit between Q1 and Q2 of 2020. On the bright side, the delivery segment continued growth, increasing to $885 million in June from $527 million in March, representing a 163% YOY growth in delivery.
Furthermore, the freight segment continued to come back since its pullback in March. Growing from $199 million to $211 million in revenue between March and June. On the other hand, when analyzing the freight segment it must be noted that freight net revenue was higher through the end of 2019 with Q4 revenue topping $219 million for the segment.
Digging into the final revenue segment, “other bets” decreased significantly from a Q1 level of $30 million to just $4 million in Q2. Also, the ATG and technology programs segment fell flat at $25 million in revenue, as in Q1.
Finally, it is important to touch on the major decline in gross bookings. June’s gross bookings declined from $15.776 billion in Q1 to $10.224 billion in Q2. On the bright side, gross bookings within the delivery segment grew 126% YOY.
When it comes to liabilities the company last reported total debt of $6.120 billion on 12/31/19. On a positive note, the company has built up a significant cash on hand position of $7.910 billion as of June 30.
In total, earnings were nasty. $UBER delivered a Q2 miss with an EPS of $-1.02 versus the EPS consensus of $-0.86. Revenue as stated also took a major hit and came in at $2.2 billion.
Management also delivered weak guidance during the Q2 call, mentioning that they believe $UBER will run a similar loss in Q3 to the Q2 loss of $837 million.
While the Q2 financials were disappointing there are a few other highlights to the stock and company. Uber currently has equity stakes in Yandex ($1.0 billion), Grab ($2.1 billion), and DiDi ($6.3 billion).
Getting into the stock itself shares have been trading mostly flat since the beginning of June. On the flip side, its flat action over the past few months could be an opportunity.
Currently, the RSI on the 6-month chart sits at 54.74 which is relatively attractive. Furthermore, the MACD sits at -.35 but does not seem to be building momentum either way on the 6-month chart. Finally, the 6-month CCI sits at 52.64 which is neither attractive nor worrisome.
When it comes to the analysts the bullishness is quite high. Currently, the mean price target for $UBER is $42.05/share representing a whopping 30.19% upside. Furthermore, the high price target is $50.00/share, and the low is $34.00/share.
The big money is also bullish on $UBER. Currently, 67.66% of Uber is owned by institutions. Top holders include Altimeter Capital Management, BlackRock Institutional Trust, and Fidelity Management & Research company.
While $UBER was once the only one in the mobility platform industry, a competitor has arisen, that competitor being $LYFT.
Lyft is technically a TaaS stock, otherwise known as a transportation as a service company. $LYFT is a digital platform in which connects drivers and riders through its on-demand ride-sharing platform.
Not only that but Lyft also offers some bike and scooter mobility options throughout major cities.
When digging into the numbers from Q2 it is immediately noticeable that the company took a major hit as did $UBER. Revenues declined from $956 million in Q1 2020 to $339 million in Q2 of 2020.
Not only that but $LYFT suffered a significant loss as did $UBER throughout the second quarter. Lyft suffered a $280 million loss during Q2, significantly larger than its Q1 loss of $204 million.
When further breaking down Lyft's numbers it is found that the revenue per active rider surprisingly held about even at $39.06/rider during Q2 compared to the $39.77/rider revenue during Q1.
On the downside, Lyft also suffered a total active rider decline, most likely due to the COVID-19 pandemic. Total active riders declined 60% YOY dropping from the Q2 2019 level of 21.8 million riders to a much lower 8.7 million active riders in Q2 of 2020.
In general Q2 earnings were not fantastic but given the circumstances did not do terribly. Surprisingly, $LYFT delivered a Q2 beat with an EPS of $-0.86 versus the EPS consensus of $-1.00. Furthermore, as mentioned earlier, revenue dropped significantly, coming in at $339 million.
Unlike $UBER, Lyft has done debatably much better when it comes to the balance sheet. When last reported, $LYFT did not have any debt and had a total cash on hand position of $2.776 billion as of June 30.
Not only is the balance sheet quite strong, but the forecast for Q3 was not terrible. $LYFT management did not release revenue guidance but expects a far lower Q3 loss of $225 million.
When analyzing the stock itself, $LYFT has been mostly flat since a slight comeback in March. While it has not done much and has been trending down long term since its 2019 IPO, now could be the time to buy.
Currently, the 6-month RSI sits at an attractive 48.88 and the 6-month MACD sits at -.59 but does not seem to be building momentum in either direction. Secondly, the 6-month CCI currently sits at .27 which is not positive nor negative.
In short, the stock itself is in a bit of a long term unactionable phase. It has not moved much in either direction over the past few months but this brief period of inaction could be the opportunity to buy.
Analysts on the other hand are very bullish. Currently, the mean price target is $42.70/share representing a 44.65% profit. Secondly, the high price target is $66.00/share, and the low is $30.00/share.
The big money is also very bullish. Currently, 67.26% of $LYFT is owned by institutions. Top holders include Alibaba Group Holdings, Alphabet Inc., and Andreessen Horowitz.
Which is the better buy?
After going through the financials and the effects of COVID-19 it is hard to make an extremely bullish case for either in the short term. On the other hand, it seems ride sharing is a major future industry.
In short, I like both but $UBER has much more risk in my opinion given its vast amount of segments, versus $LYFT’s much more simplistic business. On the flip side, $UBER has placed itself well within the food delivery segment, which should do well throughout the pandemic.
At the moment I believe $LYFT is the better buy, but if the capital is there buying both would not be a bad move if the investment is long term. Overall, I think both are attractive long term but riskier in the short term.
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Disclaimer: This is not direct financial advice, simply opinion based on independent research.