Uber Vs Lyft Stock: Which Is Best?

Some companies hold a special place in popular culture. They are so well-known in their respective markets that their names are used as verbs in everyday conversations. For example, people don’t do internet searches – they Google. They don’t have video chats – they FaceTime. And they don’t use rideshare services – they Uber.

That’s because Uber was one of the founding members of the sharing economy. Even now that the field is crowded with everything from home rentals to personal shoppers, Uber remains one of the most well-known sharing brands in the United States – and around the world.

Lyft isn’t quite as well-known as Uber, and the brand isn’t used as a verb. That’s primarily due to the fact that when measured by revenue, Uber is eight times larger than Lyft. More importantly, Uber controls 75 percent of the market.

Nonetheless, Lyft is a solid ridesharing option for consumers who have someplace to go and no way to get there – and there is a case to be made for smaller companies, as they tend to be more flexible and better able to adapt to changing market conditions.

Of course, a size comparison doesn’t offer enough information to decide which ridesharing stock to buy. Investors need more to go on when choosing whether to buy Uber stock or buy Lyft stock. Which ridesharing stock Uber vs Lyft is best in terms of returns on equity and long-term prospects?

Why Did Uber Stock Go Up?

Uber is up more than 85 percent year-to-date, which is a big relief for shareholders. The company struggled alongside its tech peers during the 2022 bear market, and it wasn’t clear whether or when Uber stock would recover. Perhaps anxious investors should have had a little more faith. Uber has repeatedly demonstrated its ability to adjust its strategy when external factors disrupt the business.

For example, at the beginning of 2020, Uber’s ridesharing revenue was growing rapidly. However, the COVID-19 pandemic decimated demand for personal transportation. Uber quickly pivoted to expansion of its food delivery service, Uber Eats, so it could take advantage of surging demand in that area.

Demand for personal transportation is back to pre-pandemic levels, and Uber currently has 130 million monthly users. Meanwhile, the UberEats business is still bringing in meaningful revenue. That’s great news for shareholders, but it gets better.

Uber is preparing for the future of personal transportation and ridesharing by investing in autonomous robotaxi technology. Uber has partnered with Aptiv, a self-driving technology company, and Hyundai, maker of the Ioniq electric vehicle, to develop what they hope to be the world’s most extensive autonomous ridesharing service.

All of those factors are positive, but that’s not why Uber stock went up so much this year. It has more to do with a better-than-expected first quarter and impressive projections for the second quarter.

During the first-quarter earnings call, business leaders told shareholders that projected gross bookings for the second quarter of 2023 were expected to total between $33 billion and $34 billion. Second-quarter EBITDA is expected to come in between $800 million and $850 million.

Is Lyft Stock A Buy?

Lyft shareholders are holding out hope that the company’s smaller size will put it in a better position to adapt to changing market conditions. Their theory is that a time will come when both ridesharing companies face an external obstacle, and Lyft will emerge ahead of its larger, more unwieldy competitor.

Unfortunately, Lyft doesn’t appear to have the sort of strong, resilient fundamentals necessary to pull off such a feat. That’s not necessarily because the company hasn’t made an effort to develop a moat. It has more to do with the fact that it is difficult to differentiate between ridesharing brands.

Ridesharing is different from other tech companies like streaming services. While streaming services compete on technology, user experience, and exclusive content, the user experience with Uber and Lyft is virtually identical. Both companies’ apps use comparable technology, and the rider experience is exactly the same – in no small part because most Lyft drivers also work for Uber.

As a smaller company, Lyft doesn’t have the resources to participate in building the future of ridesharing technology like Uber does. Its financials are fine, but it has to spend proportionally more of its budget on basics like marketing or technology updates. When Uber spends the same dollar amount on those expenses, it is a far smaller portion of the company’s total budget. Perhaps that’s why Lyft stock is up less than four percent year-to-date.

Bottom line? Most analysts agree that Lyft stock is not a smart buy.

Lyft vs. Uber Stock: Which Is Best?

Ultimately, in a comparison of Lyft vs. Uber, Uber is clearly the best ridesharing stock, even after its year-to-date growth in 2023. Uber is significantly ahead of Lyft in all of the metrics that matter, and it is better prepared to be a part of next-generation ridesharing.

Lyft’s new CEO David Risher has a number of ideas for turning the company around, and it isn’t yet clear which path he will choose. One option is to focus on a bike fleet. Another is selling the company altogether.

When Risher settles on a strategy, shareholders will have a better idea of whether they can expect any returns on their investments and, if so, when. In the meantime, Uber stock is a better buy.

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