Signs of price truce push Lyft, Uber higher

INTERNATIONAL – Lyft Inc’s hints that its cut-throat rivalry with US ride-hailing rival Uber Inc is easing may prove bad news for customers but it sent …
Lyft hints that its cut-throat rivalry with Uber is easing may prove bad news for customers but it sent shares in both companies sharply higher.Photo: File

INTERNATIONAL – Lyft Inc’s hints that its cut-throat rivalry with US ride-hailing rival Uber Inc is easing may prove bad news for customers but it sent shares in both companies sharply higher on Thursday.

With Uber set to report after Wall Street closes, analysts were excited by Lyft’s 72 percent rise in second-quarter revenue and its assertion higher spend per rider – read higher prices – would pull both third quarter and full-year sales above market expectations.

Finance chief Brian Roberts said 2018 was likely the peak of losses for Lyft and said pricing had become “more rational”, meaning the company should spend less on the constant promotions and incentives it and Uber have used to win market share.

At least nine brokerages raised their price targets on Lyft stock in response, with Credit Suisse the most bullish with a price target of $96.

Shares of Lyft jumped 8 percent to $64.99 in trading before the bell, while those of Uber rose 4.2 percent at $41.35 as traders bet its results would produce a similar message.

“While Lyft continues to spend aggressively on various initiatives, competitive pressure on rider incentives for core ride-sharing continues to ease, which is a sign of a rational duopoly between Lyft and Uber for the moment,” PiperJaffray analysts said.

“We believe Lyft will be both a catalyst and beneficiary of the growth of ride-sharing and autonomous tech over the next 10+ years.”

Lyft and larger rival Uber, both loss-making, have historically given deep discounts to attract riders, and Wall Street’s concern over the associated costs has driven shares in both lower since their stock market launches earlier this year.

Canaccord analysts said Lyft’s 22 percent expansion in revenue per rider in the quarter seemed to be driven much more by it reducing the incentives it gives to customers than any increase in numbers of riders.

With the companies having faced protests in several U.S. cities against efforts to lower driver costs, pushing ride prices higher has become vital for their efforts to gain investors’ faith in their long-term prospects.

“Lyft is starting to prove (it has a) path to profitability, which was the main reason for investor pushback during the initial public offering,” RBC analysts wrote in a client note. “The read-through to Uber is likely to be positive.”


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Lyft’s Still Not Reporting Bookings, but it Doesn’t Seem to Bother Wall Street

The art of selective disclosure has always been an important tactic for Internet companies, and the arrival this year of ride-sharing competitors Lyft …

The art of selective disclosure has always been an important tactic for Internet companies, and the arrival this year of ride-sharing competitors Lyft (LYFT) and Uber (UBER) brings interesting new wrinkles to what will and will not be disclosed.

Wednesday’s report by Lyft of its second-quarter earnings contained no information about the total bookings the company made in the quarter. Bookings is the total economic value of the rides that Lyft enables. In the company’s prospectus for its initial public offering, back in March, it offered bookings as a key metric to understand the economic value the company is creating.

But in both of its first two quarters as a public company, Lyft has declined to talk any more about bookings.

It hasn’t mattered for the stock. Lyft shares rose roughly 7% on Thursday following better-than-expected results in the report. And the stock got two upgrades, from Atlantic Equities and Wedbush Securities. On Friday, shares dropped 4.8% to close at $59.12.

Lyft responded in an email that the absence of bookings data had been addressed in May by the company and was not expected by analysts this quarter. The company further pointed out that CFO Brian Roberts had remarked on Wednesday’s call that revenue as a percentage of bookings increased during the quarter, without disclosing the amount of the increase.

Wall Street seems willing to give management the benefit of the doubt that only metrics it currently wants to disclose matter, and to give them a pass on the reduced disclosure, but that’s probably a mistake. Bookings is an important indicator, and its omission is a bad direction for financial reporting from Lyft.

But first, the good news: Lyft was able to handily beat analysts’ expectations, reporting revenue of $867 million, and a net loss of 68 cents a share, both better than the consensus for $810 million and a net loss of $1 per share. The forecast for revenue, and for Lyft’s adjusted loss on an EBITDA basis (earnings before interest, taxes, depreciation and amortization) is also above consensus for this quarter, and Lyft raised its year outlook again versus what it forecast last quarter.

What’s working is that Lyft is collecting more revenue per rider, on average, a result, the company said, of the fact that it is focusing on more high-value rides, and on things such as its enterprise business, courting less price-sensitive business travelers.

The bigger surprise, to the delight of analysts on Wednesday’s call, was that Roberts said that the way things are going, it looks like 2018 was the high-water market for the company’s spending, a big improvement from the company’s prior expectation that this year would be the “peak in investment.”

That was all that many needed to conclude that Lyft is now solidly on the path to profitability.

But there’s still the matter of the bookings. Lyft only makes money to the extent it continues to expand the pie by selling more rides. It can become more efficient, as it clearly has, but a growth company has to continue to expand its market. By omitting the bookings number, which the company once said was key, investors have no idea how rapidly it is expanding is market, or even whether it is expanding at all.

A second important implication comes with that omission. Having bookings reported allows one to calculate the so-called take rate, which is simply the amount of Lyft’s total revenue divided by the bookings. It’s a measure of how much Lyft is able to retain for itself of the economic value it is creating. And as such it’s a guide to how competitive things are with Uber, given that in periods of extreme competition, Lyft and Uber have to increase incentives to drivers — basically, reductions in the percent Lyft takes from the total fare, thereby reducing take rate.

Lyft’s management made vague remarks that indicated it has had to be less competitive on pricing of late, which is good. But without letting investors know how much total economic activity Lyft has to generate to make its revenue, a key lever of its business is being obscured, an element that the company insisted back in March was a important to understand how things worked.

Everyone forgives such omissions when other data points are going in the right direction, as they mostly did last quarter. But investors deserve more than just the good news management selectively discloses. They deserve the full picture. Time will tell whether investors demand such or are comfortable being kept in the dark.

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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 …

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.

By Jon C. Ogg

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JetBlue & Lyft Partnership Ending

With this partnership, members who linked their Lyft and TrueBlue accounts could earn 30 TrueBlue points for every ride to and from the airport, up to …

Over the past few years we’ve seen some crossover partnerships in the travel industry. For example, we’ve seen more partnerships between airlines, hotels, and ride sharing services. One of those partnerships has been between JetBlue and Lyft.

Lyft & JetBlue partnership ending

In November 2016 JetBlue and Lyft announced a partnership, allowing TrueBlue members to earn points for select Lyft rides.

With this partnership, members who linked their Lyft and TrueBlue accounts could earn 30 TrueBlue points for every ride to and from the airport, up to 1,200 points per year.

To me that wasn’t actually that exciting. If you value TrueBlue points at ~1.5 cents each (which is high), that’s like a 45 cent return on an airport ride. We’re talking about a maximum benefit of ~$18 per year at that valuation.

Well, even that partnership isn’t sticking around, unfortunately.

It has been announced that JetBlue and Lyft will be ending their partnership as of September 9, 2019. Per the announcement:

After three great years, Lyft and JetBlue have decided to part ways as of 9/9/19. It’s been quite the ride, and both Lyft and JetBlue thank you as one of the many TrueBlue members who took part in this partnership. We realize that being able to earn TrueBlue points on airport rides (and linking your TrueBlue and Lyft accounts) has been a convenient perk. Stay tuned as we look to roll out new ones in the future.

I can’t imagine this was that costly of a partnership, so I’m not sure if this decision was reached because one of the brands instead wants to work with a competing brand, or if they truly saw no upside to this partnership.

You can still earn Hilton & Delta points for Lyft rides

On the plus side, another useful partnership was launched just a few months ago for Lyft rides. As of a few months ago, those who link their Hilton Honors and Lyft accounts at earn points automatically for rides, at the following rates:

  • Earn three Hilton Honors points per dollar spent on Lyft rides
  • Earn two Hilton Honors points per dollar spent on Lyft shared rides
  • You can earn points for up to $10,000 of Lyft spend per year

This is in addition to the Delta and Lyft partnership, which lets you earn 2x SkyMiles per dollar on US airport rides, and 1x SkyMiles on all other US rides.

One of the things that makes Lyft unique is that they let you take advantage of multiple partnerships simultaneously, so you can earn Delta miles and Hilton points for the same ride, for example.

Will you miss the JetBlue & Lyft partnership?

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Uber reports billions in losses. With a driverless future far away, will investors balk?

The same huge losses came for Lyft as well: Two months after the competitor went public, it reported 1.14 billion dollars in losses. Lyft’s latest earnings …

SALT LAKE CITY — Ride-sharing companies are hemorrhaging money.

Uber posted its quarterly earnings on Thursday, making headlines for a $5 billion loss and slowed growth. The bulk of the losses can be attributed by payouts related to its initial public offering, but the company still spent enormous sums on development.

The same huge losses came for Lyft as well: Two months after the competitor went public, it reported 1.14 billion dollars in losses. Lyft’s latest earnings release, however, showed growth, and its losses are slowly declining.

Investors are wary and were concerned prior to the latest earnings. Uber’s IPO was called “hugely dissapointing” by CNN Business. Whether these companies will ever become profitable has been a looming question for some time, and it depends in large part on automation, in which both companies have been investing heavily. And whether they can deliver in time to reassure investors could be the key to their survival.

The ability to regularly get into the back of a driverless car is supposed to be right around the corner. Or at least, that’s the promise implicitly made by companies like Uber and Lyft. In one SEC filing, Lyft identifies the failure to develop autonomous vehicles “in a timely manner” as a risk factor. Uber pointed to the same risk factor if they fail to “successfully commercialize autonomous vehicle technologies.”

Ride-sharing apps are also numerous. Yes, Uber and Lyft are the biggest players, but in cities like New York, one can quickly accumulate four or five apps on their phone. I once had four — Juno, Via, Uber and Lyft — and would click between them, looking for the cheapest price or promo code. As one Washington Post columnist wrote, there is “fierce competition over every single ride.” The loyalty of riders remains in question, and the nature of the platforms makes it easy to quickly choose one over the other. As consumers have repeated over and over again, they are simply looking for the cheapest, easiest option.

Patrick Semansky, Associated Press

This March 20, 2018, file photo shows the Uber app on an iPad in Baltimore. Uber is about to embark on a wild ride on Wall Street with the biggest and most hotly debated IPO in years. Uber’s shares begin trading on the New York Stock Exchange, Friday, May 10, 2019.

One bright spot for companies is a recent Pew study that showed 36% of Americans have now used a ride-sharing app, astonishing growth from 2015 when just 15% had ever used the service and many did not know that ride-sharing apps existed.

The crowded market and ease of switching from one service to another has forced Uber and Lyft to compete on price, cannibalizing their profit margins.

Faith in Uber and Lyft’s ability to become profitable does not rest on the current mode of doing business, though. A company that has been pilloried for paying drivers low wages, posts consistent losses, and in theory should have few operating costs, shouldn’t look promising. But in the new business model of the digital age, the thing a company is currently making, creating or selling is not always the thing they are pitching to investors — and in this case, driverless vehicles are the real promise.

Bring this idea up to anyone in Silicon Valley and they will point to Amazon. It started off selling books, but what it was really pitching was domination and expansion of something that didn’t really exist yet — an online marketplace that customers would visit before the physical store.

At a tech conference, Uber’s CEO Dara Khosrowshahi said, “Cars are to us what books were to Amazon. Just like Amazon was able to build this extraordinary infrastructure first on the back of books and they went into additional categories, you’re going to see the same thing coming from Uber.” The mega-valuations of profitless companies demand a kind of domination, a monopolizing of markets, to ever live up to the potential.

Richard Drew, Associated Press

FILE – This Tuesday, June 12, 2018, file photo shows the Uber app on a phone in New York. Uber on Thursday, April 18, 2019, said that it is releasing a new feature to help riders ensure they’re getting into the right vehicles. The development comes several weeks after a University of South Carolina student was killed after getting into a car she had mistaken for the Uber ride she hailed.

But what if the thing ride-sharing companies are promising can’t be delivered, or at least not fast enough to keep afloat? Elon Musk has been optimistically announcing the advent of fully autonomous vehicles almost every year — they were coming in 2018, then 2019, and now 2020 will be the year they finally make their debut.

The autonomous vehicle marketplace is also very crowded. Over 60 companies have been given permits in California to test autonomous vehicles. The latest news reports are now predicting that automated taxis won’t be available until 2025, and it will be a decade until consumers can purchase their very own driverless vehicles.

Comment on this story

Regulations will create additional hurdles and public perception of fatal accidents. Last year an Uber autonomous vehicle killed a woman crossing the street in Arizona. As more autonomous cars grace the roads, more accidents are inevitable — and the question looms of how much the public will tolerate.

None of these factors are exactly new, but now that ride-sharing companies are public, there is increased scrutiny. The appetite for quarter after quarter losses may be coming to an end. But if investors are patient with Uber and Lyft and place the kind of faith in them that the markets placed in Jeff Bezos more than 20 years ago, they may yet see a return.

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