Increasing digital transformation initiatives are increasing the demand for technology services. However, amid increasing competition, I think it could be wise to wait for a better entry point in Uber Technologies, Inc. (UBER) and Lyft, Inc. (LYFT) for reasons discussed throughout this article.
Before diving deeper into the fundamentals of these stocks, let’s discuss what’s happening in the tech industry.
According to Statista, the global IT Services market will increase at a 7.4% annual rate, reaching $1.77 trillion by 2028. Also, the ride-hailing services market is predicted to expand by $58.23 billion until 2027, increasing at a CAGR of 12.9%.
The industry is dominated by online ride-hailing services, which are fueled by innovative mobile applications and the growing use of car-sharing and e-hailing in various locations.
However, the global technology industry is experiencing a seismic transition, with issues ranging from economic downturns, supply chain disruptions and the growing emphasis on sustainability. These challenges have compelled businesses to adapt and innovate in order to remain competitive in an ever-changing market.
Moreover, in the United States, online taxi services confront fierce competition, necessitating uniqueness and unique value propositions. Also, digital platforms require extensive background checks and verification processes.
Let’s delve into the fundamentals of the featured stocks.
Uber Technologies, Inc. (UBER)
UBER develops and operates proprietary technology applications in the United States, Canada, Latin America, Europe, the Middle East, Africa, and certain parts of Asia. The company operates through Mobility; Delivery; and Freight segments. It provides ridesharing, deliveries, and freight management.
UBER’s trailing-12-month gross profit margin of 32.41% is 7.1% higher than the 30.28% industry average. However, its trailing-12-month EBIT margin of 0.88% is 91% lower than the industry average of 9.73%
For the third quarter ended September 30, 2023, UBER’s revenue increased 11.4% year-over-year to $9.29 billion. Also, its net income attributable to UBER came in at $221 million, compared to a net loss of $1.21 billion for the same quarter. Its EPS came in at $0.10 as compared to loss per share of $0.61 for the same quarter.
However, its total costs and expenses increased marginally year-over-year to $8.90 million.
Analysts expect UBER’s revenue to increase 16.5% year-over-year to $37.14 billion for the year ending December 2023. Its EPS is expected to come in at $0.38 for the same period. It surpassed EPS estimates in three of four trailing quarters. Over the past year the stock has gained 127.5% to close the last trading session at $62.50.
UBER’s POWR Ratings reflect this uncertain outlook. The stock has an overall rating of C, equating to a Neutral in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
UBER also has a C grade for Growth, Stability and Momentum. It is ranked #46 out of 76 stocks in the Technology - Services industry. Click here for the additional POWR Ratings for Value, Sentiment and Quality for UBER.
Lyft, Inc. (LYFT)
LYFT operates a peer-to-peer marketplace for on-demand ridesharing in the U.S. and Canada. The company offers Ridesharing Marketplace, which connects drivers with riders; Express Drive, a flexible car rentals program for drivers; and Lyft Rentals, which provides vehicles for long-distance trips.
LYFT’s trailing-12-month gross profit margin of 31.12% is 2.8% higher than the 30.28% industry average while, its trailing-12-month levered FCF margin of 0.14% is 97.6% lower than the industry average of 6.07%.
For the third quarter that ended September 30, 2023, LYFT’s revenue increased 9.8% year-over-year to $1.16 billion. Its adjusted EBITDA came in at $92 million, compared to an adjusted EBITDA loss of $26.70 million in the prior-year quarter.
However, the company reported a net loss and net loss per share of $12.10 million and $0.03, respectively.
Street expects LYFT’s revenue to increase 7.3% year-over-year to $4.39 billion for the year ending December 2023. Its EPS is expected to come in at $0.51 for the same period. The stock has gained 79% over the past year to close the last trading session at $15.23.
LYFT’s mixed fundamentals are reflected in its POWR Ratings. The stock has an overall C rating, translating to a Neutral in our POWR Ratings system.
LYFT is ranked #60 in the same industry. It has a C grade for Value, Sentiment, Quality and Momentum. Beyond what is stated above, we’ve also rated LYFT for Stability and Growth. Get all LYFT ratings here.
What To Do Next?
Discover 10 widely held stocks that our proprietary model shows have tremendous downside potential. Please make sure none of these “death trap” stocks are lurking in your portfolio:
UBER shares were trading at $62.01 per share on Friday morning, down $0.49 (-0.78%). Year-to-date, UBER has gained 150.75%, versus a 24.19% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
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