Uber vs Lyft: The Shocking Truth About Which Stock is a Better Investment

Uber vs. Lyft: A Battle for the Ride-Hailing Crown – Which Is the Better Investment?

Uber (NYSE: UBER) and Lyft (NASDAQ: LYFT) are two names that have become almost synonymous with ride-hailing services. While Uber is the dominant player, operating globally and offering a diverse range of services, Lyft is still carving out its niche as a U.S.-focused competitor. Both companies went public in 2019, and since then, they’ve taken different paths in terms of growth, profitability, and market presence. So, which one is the better investment today, Uber vs Lyft? Let’s take a deep dive into both companies to assess their growth potential, profitability, and stock value.

Uber: The Global Leader with Expanding Horizons

Uber has long been the leader in the ride-hailing industry, not only in the U.S. but also in many other countries across the world. But Uber’s success doesn’t just lie in its ride-hailing business. The company has expanded into various sectors, such as food delivery with Uber Eats, freight logistics, and even bike and electric scooter rentals in select cities.

From 2018 to 2023, Uber demonstrated impressive growth. Its gross bookings grew at a compound annual growth rate (CAGR) of 23%, while its revenue expanded at an even faster rate of 27%. In fact, the number of monthly active users on Uber’s platform surged from 91 million in 2018 to 150 million by the end of 2023. While Uber’s ride-hailing business did take a hit during the pandemic, the company was able to offset the slowdown by expanding its food delivery services with Uber Eats.

Looking ahead, Uber expects a 17-18% increase in gross bookings for 2024, with total revenue projected to grow 17% this year. Analysts predict that the company will continue to grow at a steady pace, reaching $50.6 billion in revenue by 2025. Much of this growth is expected to come from its expanding subscription services, such as Uber One, which now has more than 25 million members, as well as initiatives like Uber Teens, which allows parents to authorize rides and deliveries for their teenagers. Additionally, Uber has ventured into enterprise and healthcare delivery services, which could provide new revenue streams.

Lyft: The Underdog Striving for Profitability

On the other hand, Lyft has struggled to match Uber’s global reach. The company operates only in the U.S. and Canada and has faced its share of challenges. While Uber diversified its offerings during the pandemic by focusing on food delivery through Uber Eats, Lyft had no such safety net. The company, therefore, suffered a tougher slowdown in 2020, compounded by driver shortages that drove up prices.

That said, Lyft’s revenue has still grown at a solid pace, with a CAGR of 15% from 2018 to 2023. Lyft only started sharing its gross bookings data in 2023, but it reported that the number of active riders grew from 18.6 million at the end of 2018 to 22.4 million by the end of 2023. The company also saw a 31% rise in revenue in 2024, driven by features like its Price Lock service, which allows riders to lock in a price for a set destination, and Lyft Media, which incorporates media content and ads into the app. Lyft’s ongoing delivery partnership with DoorDash and continuous improvements to its core app have also been contributors to growth.

While Lyft’s growth trajectory is encouraging, it still lags behind Uber, and its prospects for future growth are somewhat tied to its ability to turn a profit. Analysts predict that Lyft will finally become profitable by 2025.

Profitability Uber vs Lyft: Who’s in the Driver’s Seat?

When it comes to profitability, Uber currently has the edge. After years of losses, Uber turned profitable in 2023 on a generally accepted accounting principles (GAAP) basis. This was largely thanks to the company’s strategic moves, such as divesting non-core businesses, downsizing its freight division, and cutting unnecessary costs. Uber’s profitability is expected to continue improving, with analysts projecting that its GAAP earnings per share (EPS) will grow by 117% in 2024 and 22% in 2025.

In contrast, Lyft has only just turned positive on an adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) basis in 2023. However, the company is still not profitable on a GAAP basis, though it has been making strides to stabilize its finances by cutting costs. Lyft also doesn’t have any overseas operations, so its future growth is largely tied to its ability to expand within the U.S. and Canada. Analysts believe that Lyft could finally reach profitability by 2025, but the road ahead remains challenging.

Stock Valuations: A Tale of Two Companies – Uber vs Lyft

When it comes to stock valuation, Uber looks like the safer bet. Its stock is currently priced at around 15 times next year’s adjusted EBITDA, which still seems reasonable given the company’s diverse business model and growth prospects. That being said, Uber’s stock has been under pressure recently due to an ongoing investigation by the Federal Trade Commission (FTC) into Uber One’s subscription policies. However, most analysts still believe that Uber will overcome these challenges and continue to thrive in the long run.

On the flip side, Lyft’s stock is currently trading at just eight times next year’s adjusted EBITDA, a significant discount compared to Uber. This low valuation could indicate that the market is undervaluing Lyft, particularly given the company’s recent growth and the potential upside as it moves toward profitability. However, Lyft remains a riskier investment due to its smaller scale, slower growth rate, and lack of international expansion.

So, Which Stock Is the Better Buy? – Uber vs Lyft

Uber clearly holds the upper hand in terms of size, scale, and profitability. The company’s global reach, diverse services, and growing subscription offerings make it a solid long-term investment. However, it’s also important to note that Uber’s stock has already appreciated quite a bit, and the current market uncertainty due to regulatory scrutiny could limit near-term gains.

Lyft, on the other hand, is the underdog. While it lags behind Uber in terms of market reach and profitability, its low stock price could provide a decent upside for risk-tolerant investors. As the company continues to optimize its business and moves closer to profitability, Lyft could potentially offer more value at its current price point.

In conclusion, if you’re looking for stability and a safer long-term bet, Uber is likely the better choice. But for those willing to take on a bit more risk and hoping for a potential turnaround, Lyft’s current stock price might present an attractive opportunity. It all depends on your investment goals and risk appetite.

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