© Reuters. FILE PHOTO: A sign marks a meeting place for Lyft and Uber riders at San Diego State University in San Diego, California, U.S., May 13, 2020. REUTERS/Mike Blake
By Akash Sriram and Aditya Soni
(Reuters) – Lyft (NASDAQ:) shares fell 32% before the bell on Friday after a gloomy forecast fueled concerns that the company will have to cut prices and sacrifice profit to avoid being a distant second behind rival Uber. (NYSE:) in North American rideshares. market.
The two companies have been locked in a battle for market share coming off pandemic lows, and the latest earnings show Uber’s greater scale and pricing power allowed it to capitalize on the resurgence at the expense of its rival.
“Rideshare is now approaching full recovery in the US, but Lyft is not,” said JP Morgan analysts, who were among 13 to lower their price targets on the shares.
Lyft shares were set for their worst day on record, if pre-market losses hold. The company was set to lose $2 billion in market value and nearly all of its share price gains this year.
GRAPHIC: Lyft shares react to quarterly results (https://www.reuters.com/graphics/LYFT-STOCKS/movaklobeva/Pasted%20image%201676028075609.png)
Lyft on Thursday provided a first-quarter earnings and revenue forecast that came in below market expectations, a stark contrast to Uber’s strong earnings forecast and better-than-expected earnings.
“This outlook continues the recent trend of Lyft growing more slowly than the broader rideshare market… placing a greater focus on Lyft’s scale and platform breadth relative to Uber,” the analysts said. Canaccord Genuine.
Driver supply at Lyft rebounded in the fourth quarter to levels seen in 2019 before the pandemic, while driver supply at Uber was at a record high.
However, the improved driver supply will mean Lyft will see a smaller price increase in the first quarter, company executives said.
CHART: Uber rideshare revenue growth outpaces Lyft (https://www.reuters.com/graphics/LYFT-RESULTS/xmpjkryywvr/chart.png)
The company also had to lower prices in January after Uber dropped its fuel surcharge earlier that month, while analysts said Lyft’s increased presence on the West Coast also weighed as many tech companies didn’t They have returned to their posts.
“Lyft is making the difficult trade of lower prices to help conversion and avoid a further loss of shares to Uber,” Needham analysts said.
“Despite the constructive feedback on demand, we do not assume that volume will be able to offset lower prices.”
