Lyft shares fall 30% as it struggles to attract drivers
Uber posted revenue of $6.9 billion, a 136% spike over the same three months last year. Travel numbers fell 3% from the previous quarter – a possible reaction to an increase in omicron variant infections – but rose 18% from the year-ago period. It posted a net loss of $5.9 billion, driven by losses from investments in Didi, a Chinese ride-sharing giant; Grab Holdings, a technology company; and Aurora Innovation, an autonomous vehicle company.
Ride-sharing companies are trying to better position themselves for an expected surge in ridership as the global economy continues its difficult emergence from pandemic conditions. To get there, Lyft said it would have to spend more on driver incentives in the face of rising gas prices. This did not sit well with investors and the stock fell 29.9% to close at $21.56.
Shares of Uber also fell, wiping out 4.6% to end the session at $28.12, even though the company said it has already made the necessary investments to attract more drivers. The two companies are “Starsky & Hutch of [Wall Street’s] perspective and attached at the hip,” as Ives of Wedbush puts it.
Meanwhile, the broader market experienced a late afternoon surge that sent the Dow Jones Industrial Average up over 932 points, or 2.8%. The S&P 500 and Nasdaq composite indices climbed 3% and 3.2% respectively. Although the Federal Reserve raised interest rates by half a percentage point – marking the biggest jump since 2000 – and Fed Chairman Jerome H. Powell said that further rate hikes At this stage were “on the table”, markets rallied after saying the Fed board had not seriously discussed going higher.
Lyft uses a driver incentives to ensure it can handle any sudden influx of passengers, which has led some analysts to worry that it is spending too much in an uncertain economy. Adjusting the supply of drivers is “like moving the Titanic,” Lyft chief executive Logan Green said on an investor call Tuesday, while ridership “can change in a flash. “.
“We believe now is the right time to invest a little more to ensure that we are ready to meet this demand and that we are here to provide the best levels of service possible,” Green told investors.
But in a recent note, Ives said investors were spooked by all that driver spending, even as he offered a generally positive outlook on Lyft and Uber’s long-term prospects.
“Lyft is spending money like an 1980s rock star and it will get a violent backlash from investors in an already jittery market,” he wrote.
Uber executives say they already have enough drivers, having invested heavily in driver incentives and innovation over the past year. The company has the advantage of attracting drivers through its food delivery service Uber Eats.
“We are as pleased with our driver offering … as ever,” Uber chief executive Dara Khosrowshahi said in a call with investors on Wednesday.
Still, he recognized the need to attract even more, as well as reactivate some who had left the platform. “We know we have to improve. We need to keep increasing the number of new drivers on the platform,” he said. “We’re also focused on resurrecting a number of riders, and we’re focused on increasing engagement on the platform because revenue levels are so high.”
Also on Wednesday, Didi revealed he was under investigation by the U.S. Securities and Exchange Commission regarding his initial public offering in June 2021, in which he raised $4.4 billion.
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