March 24, 2020, 12:52 p.m. EDT

Believe it or not, Uber and Lyft’s Are on a Wild Ride Despite COVID-19!

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Mar 24, 2020 (IAM Newswire via COMTEX) -- Ride hailing services Uber and Lyft entered 2020 gunning for profits, but the spread of coronavirus in the U.S. is feared to threaten those plans as companies throughout the globe are facing unforeseen challenges. Due to governments imposing self-quarantine to Americans and Europeans in an effort to contain the spread, the demand for ride hailing is also expected to plunge. But the outbreak is also believed to highlight important distinctions between the two fierce competitors, moreover the business model differences between Uber /zigman2/quotes/211348248/composite UBER +1.66% and Lyft /zigman2/quotes/208999293/composite LYFT +2.86% and reveal which one is more resilient. Yet, despite the initial drop and quite a dramatic one as Uber shares fell about 50% this year and Lyft 65%, the end of last week ended up being a wild ride as Uber's shares rose 38 percent last week and Lyft followed with 29 percent. And it's all because of Uber's analyst call where the CEO confidently stated that the company has enough cash to get through pretty much anything that 2020 might bring. Confident indeed as the pandemic will also amplify their weak spots- and we already know some of them.

Markets crashing

As the outbreak wreaks havoc on financial markets, and threatens to upend the economy, even the Dow Jones Industrial Average plummeted in its worst single-day crash since 1987. Neither of the two ride hailing companies issued a revision of their financials when all this started. When the pandemic was 'only' beginning to be in the air, it seemed like people were shifting to Lyft or Uber from other modes. But things went downhill pretty fast and that quickly stopped being the case, especially since a significant chunk of their business belongs to airport rides with flights being cancelled and airports in Europe closed. As for Uber, an estimated 15% of trips are attributed to airport rides. If plummeting demand for flights serves as a rough indicator, airport trips should see a corresponding dramatic drop in demand. And that is immense as United Airlines Holdings Inc /zigman2/quotes/205037281/composite UAL -1.70% , JetBlue Airways Corporation /zigman2/quotes/207639051/composite JBLU -1.91% and Southwest Airlines Co /zigman2/quotes/201071949/composite LUV -2.47% referred to the impact of coronavirus as even worse than 9/11, and this impact will last for months to come. Only last week, Uber has already seen ride volume drop 70 percent in cities most affected by the outbreak and the pandemic is yet to reach its peak.

So, all this confidence does seem a bit surprising especially considering Uber's CEO Dara Khosrowshahi evaluated the coronavirus at the beginning of March as "not material" because geographies affected at the time contributed only partially to its main business. That was the case before the World Health Organization (WHO) declared coronavirus a global pandemic.

And it used to be so good...

On March 4, Lyft CFO Brian Roberts joyfully revealed that last week was the single biggest week in Lyft's history, both when it comes to revenue and rides. Lyft was already doing great since early February, when Uber moved its profitability target to the end of 2020 and the increased investor confidence brought Lyft along. Lyft has targeted the end of 2021 to reach the same goal. Both competitors were focused at growing top-line results and fortifying their bottom line to reach profitability in the near future.

Uber at least has Uber Eats to its rescue

It's a supply problem as well as a demand problem, Even food delivery is better for drivers or at least perceived as better since he impression is it's less risky –you're grabbing a bag of food, you can wear gloves if you want, or there's a no-contact feature where you can drop deliveries off at the door." And COVID-19 will only further emphasize the different business models as it tests their resilience

While Lyft sells personal mobility services and that includes offering car, scooter and bike trips in the U.S. only. On the other hand, Uber has a food delivery business and a freight logistics division, Uber Eats and Uber Freight respectively. And it is this segment that could only amortize its coronavirus-related EBIDTA losses.

Lyft's new meal delivery option

Lyft announced it will be offering delivery of critical medical supplies and meals in this critical time. Target groups include the elderly, those living with chronic diseases and students who usually get subsidized lunches through school.

The underlying problem is far greater

An immense material hit is certain. But any hit to both Uber and Lyft's whole fiscal year (2020) results is likely to push profitability timelines. Both companies acknowledged in their annual reports that a "pandemic or an outbreak of disease or similar public health concern, such as the recent coronavirus outbreak" could materially affect their results. The coronavirus had also led to production delays with bikes, scooters and automobiles that are crucial to their business. And unfortunately, we already know with certainty there is no company who will be unharmed as the global economy will be hit far more than initially anticipated. Perhaps the most dangerous thing is that they were invented to support a lifestyle that won't be possible for quite some time as the world is forced to adopt a much slower pace. and Considering human psychology, who knows how consumer behaviour will change after spending weeks and maybe even months in isolation. For the better or worse, we're all in this together. The two companies also need to find ways to protect their employees as Uber already urged the Congress to include its drivers in the financial assistance program. But when it comes to the short-term, liquidity is key in any crisis and Uber's $10 billion in unrestricted cash as of the end of February is beyond comforting for the time being. But nothing will ever be the same once all this is over- nor it should be as we'll hopefully learn a lot from this and use it as an opportunity to improve current practices.

This article is not a press release and is contributed by Ivana Popovic who is a verified independent journalist for IAMNewswire. It should not be construed as investment advice at any time please read the full disclosure . Ivana Popovic does not hold any position in the mentioned companies. Press Releases – If you are looking for full Press release distribution contact: press@iamnewswire.com Contributors – IAM Newswire accepts pitches. If you're interested in becoming an IAM journalist contact: contributors@iamnewswire.com Questions about this release can be send to ivana@iamnewswire.com

The post Believe it or not, Uber and Lyft’s Are on a Wild Ride Despite COVID-19! appeared first on IAM Newswire .

COMTEX_363780476/2618/2020-03-24T12:52:00

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$ 34.83
+0.57 +1.66%
Volume: 18.68M
May 22, 2020 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$60.39 billion
Rev. per Employee
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/zigman2/quotes/208999293/composite
US : U.S.: Nasdaq
$ 31.26
+0.87 +2.86%
Volume: 6.70M
May 22, 2020 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$9.59 billion
Rev. per Employee
$450,139
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/zigman2/quotes/205037281/composite
US : U.S.: Nasdaq
$ 25.40
-0.44 -1.70%
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N/A
Market Cap
$7.38 billion
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$448,946
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/zigman2/quotes/207639051/composite
US : U.S.: Nasdaq
$ 9.24
-0.18 -1.91%
Volume: 11.59M
May 22, 2020 4:00p
P/E Ratio
11.30
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N/A
Market Cap
$2.49 billion
Rev. per Employee
N/A
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/zigman2/quotes/201071949/composite
US : U.S.: NYSE
$ 28.87
-0.73 -2.47%
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May 22, 2020 4:00p
P/E Ratio
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0.00%
Market Cap
$17.02 billion
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$373,554
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