Stock Analysis

Uber (NYSE: UBER) vs Lyft (NASDAQ: LYFT): Comparing the Ride Sharing Rivals

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NYSE:UBER
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Key Takeaways from this Analysis:

  • Uber and Lyft have both set out to improve margins with a freeze on hiring and other cost-cutting measures.
  • Uber offers the advantage of diversified revenue streams with ride-hailing as well as food and freight delivery, while Lyft remains a ride-hailing pure play.
  • Lyft is smaller which gives it more flexibility and the potential for faster growth.

Uber Technologies ( NYSE: UBER ) and Lyft ( NASDAQ: LYFT ), the largest listed ride-hailing companies have been through a challenging period since listing in 2019. In 2020, their core ride-hailing businesses came to a standstill due to the Covid-19 pandemic. And then, just as business began to recover in 2021, investors turned their backs on growth companies. Both stocks are down more than 60% from their 2021 highs, and in both cases, the companies have set out to rationalize spending to achieve positive net income.

Comparing the Two Companies

Investors wanting exposure to the ride-hailing business must decide between the two stocks or hold both. We decided to see if either company stands out as a more attractive pick.

While Uber is much larger than Lyft, the two companies have similar profiles when it comes to growth and margins. The following graphics indicate that Lyft has slightly better gross and net profit margins.

UBER (NYSE: UBER) Revenue, Earnings and Margins, 31 May 2022
LYFT (NASDAQ: LYFT) Revenue, Earnings and Margins, 31 May 2022

Neither company is profitable, so the valuations are best compared using a price to sale (P/S) ratio. Lyft trades on a lower ratio, which suggests investors are more optimistic about Uber's future.

Uber Lyft
Market Cap $46.5 bln $6.2 bln
Price/Sales Ratio 2.2x 1.8x
Revenue Growth Last 12 Months 98% 42%
Average Revenue Growth Over 5 Years 35.5% 56.4%
Forecast Revenue Growth Rate 17.2% 17%
Gross Margin 36% 40%
Net Profit Margin -29.5% -22%

When we compare the companies using publicly available data, Lyft has better numbers on every metric apart from revenue growth over the last 12 months. This is a result of Uber's food delivery business supplementing the ride-hailing business in 2021.

Food and Freight Delivery

The major difference between the two companies is the fact that Uber offers food and freight deliveries as well as ride-hailing, while Lyft is a pure-play ride-hailing business. 

In 2021, food delivery accounted for 45% of Uber's total revenue, narrowly beating the ride-hailing segment. This wasn't entirely surprising as the Covid pandemic impacted the ride-hailing business in 2020 and 2021. However, the delivery business is now generating around 80% of the ride-hailing segment's record 2019 revenue, so it is a very substantial business.

The food delivery business is highly competitive with many participants operating at a loss. Rising interest rates could result in some of these businesses exiting or being acquired if they can't arrange further funding.

If Uber's food delivery business survives this period, it could end up in a much stronger position. Consolidation in the food delivery industry could become an even bigger differentiating factor between the two companies.

Relative Size

Uber's larger size may eventually give it greater benefits from economies of scale. However, current margins suggest these benefits have yet to materialize.

One can argue that Lyft's smaller size also gives it several advantages. Firstly, it's nimbler and can choose the markets in which it wants to operate. Secondly, its burn rate is lower in absolute terms, so may it be able to secure funding more easily if the environment remains challenging. Smaller companies sometimes offer more upside because they are growing off a smaller base and may be viewed as acquisition targets.

The Bottom Line: Uber vs Lyft

There's not a lot differentiating the two companies, and their share prices are likely to remain highly correlated until there is a significant difference. The highly competitive food delivery business could also prove to 'make or break' Uber over the next few years.

Lyft offers the advantage of a smaller, more flexible business, and pure-play exposure to ride-hailing at a slightly more reasonable valuation.

Some investors have chosen to hold both stocks to avoid the risk of making the wrong choice. It's hard to fault this approach as neither company is a clear winner at this stage — though that could change in time.

To find out more about these companies check out the full analysis for Uber and the full analysis for Lyft .

What are the risks and opportunities for Uber Technologies?

Uber Technologies, Inc. develops and operates proprietary technology applications in the United States, Canada, Latin America, Europe, the Middle East, Africa, and Asia excluding China and Southeast Asia.

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Rewards

  • Trading at 46.3% below our estimate of its fair value

  • Earnings are forecast to grow 65.23% per year

Risks

  • Shareholders have been diluted in the past year

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Share Price

Market Cap

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Simply Wall St analyst Richard Bowman and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

Richard Bowman

Richard Bowman

Richard is an analyst, writer and investor based in Cape Town, South Africa. He has written for several online investment publications and continues to do so. Richard is fascinated by economics, financial markets and behavioral finance. He is also passionate about tools and content that make investing accessible to everyone.

About NYSE:UBER

Uber Technologies

Uber Technologies, Inc. develops and operates proprietary technology applications in the United States, Canada, Latin America, Europe, the Middle East, Africa, and Asia excluding China and Southeast Asia.

High growth potential with mediocre balance sheet.