Ride-hailing platforms Uber (UBER) and Lyft (LYFT) have grossly underperformed the markets since they went public in 2019. Uber priced its IPO at $45 per share and is currently trading at $39 while Lyft went public at $72 per share and the stock is also currently trading at $39.
The ongoing pandemic has weighed heavily on the top-line of these two companies who are also struggling to report consistent profits. However, Wall Street analysts are bullish on both stocks for 2022.
Therefore, contrarian investors may want to consider scooping up one of these stocks under $40. Today I’ll analyze and compare both to determine which is currently the better investment.
Valued at a market cap of $73.5 billion, Uber has increased sales from $11.27 billion in 2018 to $14.14 billion in 2019. However, sales fell to $11.13 billion in 2020 and stand at $14.8 billion in the last 12-months.
While Uber is synonymous with ride-hailing, the company has diversified its offerings to include food delivery and freight ventures in the recent past. This diversification enabled Uber to offset a significant portion of its losses from ride-hailing, which came to a screeching halt in 2020.
In addition to COVID-19, Uber is battling multiple legal issues. Uber classifies its drivers as contractors which means it does not have to provide them with benefits such as insurance or even a minimum wage. However, the United Kingdom has forced Uber to provide its drivers with relevant benefits and other countries might soon follow suit.
Uber is on the cusp of profitability and is forecast to narrow adjusted losses to $0.68 per share in 2022, compared to a loss of $3.86 per share in 2020.
A smaller company compared to Uber, Lyft is valued at a market cap of $12.75 billion. Lyft increased sales by 73% year over year to $864.4 million on the back of an increase in the number of drivers. Its driver supply materially improved in Q3 and was up 45% year over year.
Lyft also emphasized the demand for rides is recovering as the vaccination rollout gained pace. The company’s active riders also rose by 51.4% to $18.9 million while revenue per active ride was up 14.2% at $45.6 in Q3 of 2021.
An increase in revenue coupled with a lower cost structure allowed Lyft to report a loss of $71.5 million, compared to a loss of $459.5 million in the year-ago period. Its ride-hailing business also reported a positive EBITDA of $67.3 million.
In Q4 of 2021, Lyft forecasts sales to range between $930 million and $940 million which will be 64% higher compared to the prior-year period. It also expects adjusted EBITDA between $70 million and $75 million.
Uber sales are forecast to rise by 52.8% to $17 billion in 2021 and by 49% to $25.4 billion in 2022 which suggests it’s valued at a forward price to 2022 sales multiple of 2.9x. Comparatively, Lyft sales might rise by 34.4% to $3.18 billion in 2021 and by 38% to $4.4 billion in 2022, valuing the stock at a price to sales multiple of 2.9x.
We can see that both Uber and Lyft are trading at similar valuations. Despite Lyft’s better profit margins, I believe Uber’s international presence and a diversified business model make it a better bet right now.
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UBER shares were trading at $39.12 per share on Thursday morning, up $1.26 (+3.33%). Year-to-date, UBER has declined -6.70%, versus a -3.63% rise in the benchmark S&P 500 index during the same period.
About the Author: Aditya Raghunath
Aditya Raghunath is a financial journalist who writes about business, public equities, and personal finance. His work has been published on several digital platforms in the U.S. and Canada, including The Motley Fool, Finscreener, and Market Realist. More...
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