Lyft (LYFT) is leading its key competitor Uber (UBER) higher as many are beginning to expect more bullish ridesharing data from Uber's Thursday evening earnings.
Shares of Uber surged by about 7%, while Lyft rose around 4% on Thursday midday. That left Uber inching towards its $45 initial public offering price, as many expect results to mirror, or accelerate past, Lyft's strong results as the duopoly begins to take a more rational tack.
Despite possible concerns over running so rapidly into earnings, Lyft also gained strongly in the days prior to its earnings release and proved that gains could be sustained.
Earnings Expectations
To find a similar path to Lyft's trajectory on Thursday, Uber will need to hit or exceed the analyst expectations of $3.4 billion in revenue and a loss of $2.72 per share for the June quarter, on a GAAP, or generally accepted accounting principles, basis. On a non-GAAP, or adjusted, basis, the loss is expected to tick in at $2.03 per share.
While Uber is a substantially bigger company than Lyft is, the losses are significant and show the expectation of losses getting worse before they get better.
Earnings per share losses have worsened substantially since the S-1 filing was released ahead of the company's IPO, widening from under $1.87 per share for the full year of 2018 to the latest expectation that keeps the company in the camp of "never been profitable."
Rational Ride-sharing
Yet, the results from Lyft that suggest a normalizing relationship with Uber, in which the two dominate the so-called ride-sharing service business as duopoly, might mean the path to this milestone may indeed be achievable.
Notably, Lyft management raised its guidance for the coming quarter, given the strengthening dynamics in terms of revenue per rider.
"The price adjustments are modest, but we anticipate that these changes will increase revenue per active rider on both a quarter-over-quarter and year-over-year basis, and we expect that these changes will accelerate our path to profitability," Lyft CEO Brian Roberts said. "We believe these price adjustments are an industry trend."
If the two can find a way to rationalize prices, there may be room to find a profitable medium where both companies can coexist. Given Uber's larger status, this could well be a larger positive for the larger company.
Overextended?
But aside from Uber's somewhat less attractive public image as compared to Lyft's, another concerns on the company is its constant spending on international and ancillary bets.
"Lyft has been focused on core ride-sharing in North America and this concentration on one primary task has allowed for the development of a compelling offering, leading to share gains," Piper Jaffray analyst Michael Olson said. "Uber may arguably have more 'shots on goal' for long-term growth, via international expansion, food delivery and freight, but Lyft has the potential to be a much larger business than it is today by simply continuing to funnel resources into domestic ride-sharing, scooters and bikes, and autonomous tech development."
Uber -- in these many shots on goals -- has had both hits and misses, both of which have been costly.
Most recently, Uber stated its intention to be a world leader in ride-hailing with a $3.1 billion blockbuster takeover of Dubai-based ride sharing rival Careem, during the first quarter, to target the Middle Eastern ride-sharing market.
"This is an important moment for Uber as we continue to expand the strength of our platform around the world," said CEO Dara Khosrowshahi, at the time. "With a proven ability to develop innovative local solutions, Careem has played a key role in shaping the future of urban mobility across the Middle East, becoming one of the most successful startups in the region."
An update on the success of this acquisition will be pivotal as not every market targeted for expansion has borne fruit for shareholders, to say the least.
In China, Uber sold its operations to Didi Chuxing after taking losses on the service and failing to oust the domestic UCar rival.
In Russia, Uber sold its business to search giant and fellow autonomous car innovator Yandex N.V. (YNDX) , in a deal valued at $3.7 billion, that gave Uber a 36.6% stake in the merged entity.
In Southeast Asia, Uber sold operations to Grab amidst the protests of Singaporean regulators, again gaining a stake in a new company, rather than expanding under its own banner.
It has also been banned from major cities across the European Union after protests by taxi drivers in the region and battles with regulators.
In the end, there is some question as to whether Uber simply has too many shots to take and cannot focus on finding profitability in the way that Lyft clearly has.
Eats Is a Tasty Bonus
The main positive differentiation is in the company's Uber Eats business, which poses a real threat to existing players like Grubhub (GRUB) and DoorDash.
The service has quickly become a national leader and could unlock billions more in value for the company if margins can be maintained.
GrubHub -- not $Uber Eats -- runs NY. pic.twitter.com/lAwfHbgApt
— Brian Sozzi (@BrianSozzi) June 6, 2019
Interestingly, the strength of this business also dovetails with international aims of the company, doubling down on the differentiation Uber possesses from Lyft's already successful results.
CEO Dara Khosrowshahi said that the Eats business grew over 100% in the first quarter of 2019 to over $3 billion in gross bookings.
"This growth is impressive on its own, but even more so that Q1 '19 represents year-over-year growth over Q1 of last year, which is a quarter at which we believe Eats became the largest online meal delivery player outside of China," he added. "Our 2018 goal of improved restaurant selection was achieved with 220,000 restaurants on the platform at the end of '18 and we continue to add selection at an aggressive pace."
Khosrowshahi will need to keep up this pace to satiate the market's appetite on Thursday evening, as the upside surprise that could separate it from raw ride-sharing market dynamics is likely to be a leading factor to foment bullishness.
Other Bets and Autonomous
Of course, there are more plays within the Uber portfolio that could provide a further perk up in shares, although almost all are much smaller segments.
Uber Freight has grown rapidly, but from an exceptionally small base of only just over $100 million.
While management has touted companies like CVS Health (CVS) , Cisco (CSCO) and Heineken (HEINY) as partners, the spending is likely not much to spark.
The last, and arguably the most important, factor to keep in mind for Uber in each of its earnings calls is the possibility of progress reports on its autonomous driving effort.
Lyft is partnered with Alphabet's (GOOGL) Waymo, which is considered by many to be the leader in the race to autonomous vehicles, which makes Uber's progress on the project imperative.
I would not expect a significant update with so much noise already emanating from the ride-sharing industry ahead of the quarter. But it's yet another thing to keep in mind.
Stick with TheStreet for rapid analysis as the print hits the presses this afternoon.
