Uber beats estimates, but core business lost $509 million in Q2

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CNBC 04 August, 2021 - 04:35pm 46 views

Uber and Lyft prices spike in Colorado as coronavirus eases

The Colorado Sun 04 August, 2021 - 05:10pm

Kroeker opened up his Uber app to hail a ride home and was shocked. The cost for the 19-mile trip on the Saturday night in June? Nearly $150, and the prices at rival Lyft weren’t much better.

Before the pandemic, the trip using a ride-hailing service cost between $20 and, at most, $60. 

“There weren’t any other options,” Kroeker said, “so we had to take it.”

With pandemic restrictions now lifted across Colorado and vaccination rates ticking up, people are returning to their normal routines and activities. That includes their use of Uber and Lyft, ride-hailing apps that for years have provided a safe way to get home after a few drinks or have allowed people to avoid the headache of trying to park in a crowded area. 

But those who use the services have lately been in for a jaw-dropping surprise when they dust off the application’s cobwebs after months of inactivity and find that prices have shot up, because demand is outpacing a reduced supply of drivers, triggering dynamic pricing that Uber and Lyft use to try to address the imbalance. A Rakuten Intelligence study found that Uber prices were up 40% in April compared to the previous year.

Hailing a ride can also take much longer than normal with so few drivers available. 

With taxi services on the decline, in large part because of the Uber and Lyft disruption, riders are often left with few options. They can learn to live with the higher prices, drive themselves or simply stay home.

Pam Winsor paid $117, including tip, for a ride home with Lyft to the Park Hill neighborhood in Denver from the airport on July 22. That was about half the price of her airline ticket to Boston. 

Winsor said she waited 20 minutes for a Lyft XL — a vehicle with more seats — even though she was traveling alone. Getting a smaller-sized car would have taken even longer and she was ready to be home after her flight was diverted to Wichita, Kansas. Winsor looked for a cab but didn’t see any available. She even tried asking fellow ride sharing passengers at the airport where they were headed to see if she could split the cost with them. 

“It left a terrible taste in my mouth about Lyft,” Winsor said. “I thought about canceling my account.”

Some say they are now avoiding Uber and Lyft whenever they can, rethinking that second or third drink to stay sober for the drive home. That has a trickle-down effect on the economy as Colorado restaurants and bars battle back from the pandemic downturn. 

“It has made us decide to drive a little more, which is unfortunate,” said James Dixon, who lives in Adams County and has been keeping track of the price hikes. “We’ve been noticing the increases for quite awhile.”

Dixon arrived back at Denver International Airport on Sunday night after a trip and opened the Uber app to find an $85 quote for a ride home. Before coronavirus, the same trip would cost about $40. He settled on Lyft, which after a tip cost him $61.

Dixon said he and his wife like to enjoy Colorado’s craft beer scene, but they’ve had to think twice about venturing out because of the cost of a ride-hailing trip. He’s also rethinking taking Uber or Lyft to the airport, which he does frequently for work, because parking at DIA may end up being cheaper. 

Spokespeople for Uber and Lyft said the increased prices are due to a spike in demand as the pandemic eases. There simply aren’t enough drivers working to keep up with all of the people who want to get out of their homes for the first time in more than 15 months. 

“As more people are vaccinated, demand from customers has increased, which has caused longer wait times,” said Michele Blackwell, public policy manager for Uber. “We’re working to bring more drivers and delivery people onto the road.”

The ride-hailing companies are offering incentives to get more drivers on the road and work out the imbalance. (“For anyone interested, now is a great chance to earn money flexibly on your own schedule,” Blackwell said.) But they’re running into the same problem finding workers that other employers are experiencing.

Uber and Lyft drivers are gig workers who can claim federal pandemic unemployment benefits in Colorado until Sept. 6, when they expire. The drivers have long complained about low pay and a lack of benefits.

A Lyft spokesperson said the service has “added thousands of drivers in the past few weeks and it’s already leading to a better rider experience with wait times down more than 15% nationwide, and down 35% in some major markets.”

“For drivers, it continues to be a great time to drive with drivers in top markets earning significantly more than they were pre-pandemic,” the spokesperson said in another nod to the driver shortage. The company didn’t elaborate on how it is that some drivers are earning significantly more money.

Lyft has a new “Wait & Save” feature that allows riders to delay their trips until the cost goes down. But Dixon said it can take a half-hour or more for the charge to become more palatable. 

“When you have a trip to the airport,” he said, “it’s just not a possibility.”

Ryan Howard, a frequent Uber user who lives in Denver, paid about double last month — or $30 — for a 14-minute trip downtown to get a haircut. He checked Lyft to see if it was any cheaper, but it wasn’t.

“I did consider driving, but trying to park down on 16th Street isn’t easy at any time — especially when you’re trying to make an appointment,” he said. “As a consumer, there’s really not a whole lot you can do.”

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Lyft Stock Is Tumbling. Rising Costs Overshadow Solid Results.

Barron's 04 August, 2021 - 05:10pm

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Lyft stock tumbled Wednesday despite its better-than-expected June quarter results, as investors focused instead on disappointment with the third-quarter outlook and the company’s increasing costs for driver incentives.

In late trading Tuesday, Lyft shares rallied after the ride-sharing company disclosed that it reached profitability one quarter sooner than expected—as measured by adjusted Ebitda, or earnings before interest, taxes, depreciation, and amortization.

But on Wednesday, the stock dived 8.6% to $50.59. Uber Technologies (UBER), which reports results after the close on Wednesday, fell down 2.6% to $41.68.

Lyft (ticker: LYFT) posted second-quarter revenue of $765 million, up 125% from a year ago, and well ahead of the Street consensus at $696 million. Profit based on adjusted Ebitda (earnings before interest, taxes, depreciation and amortization) was $23.8 million, including about $16 million in one-time gains. 

Active riders (people who took at least one ride in the period) reached 17.1 million, up 97% from a year ago, and up 27% from the March quarter. Revenue per active rider was $44.63, up 14% from a year ago, but down slightly from $45.13 in the March quarter.

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One reason for the pressure on the stock is rapid growth in Lyft’s incentive payments to drivers as a way to boost supply. On last night’s earnings conference call with the Street, Lyft said it paid more than $375 million in driver incentives in the quarter, up 92% from the March quarter. That is classified as “contra-revenue,” reducing the top line. The company said it expects that figure to be higher in the September quarter, as it pushes to increase supply to meet customer demand.

On the call, Lyft projected third-quarter revenue of $850 million to $860 million, up between 70% and 72%, but a little shy of the old Street consensus forecast of $864 million. The company sees third-quarter adjusted Ebitda in the $25 million to $35 million range, which would be up from about $8 million in the June quarter when backing out the aforementioned one-time gains. The company said the forecast reflects about a $30 million to $40 million reduction to reflect reduced ride prices.

Analyst reaction to the quarter was mixed. 

Gordon Haskett analyst Robert Mollins, who has a Hold rating and $62 target on the stock, writes in a research note that Lyft is making “solid progress on the driver supply side,” but that the commentary around spending incremental dollars on driver supply “puts a damper” on the outlook. As Mollins notes, the company said it would invest any incremental revenue dollars above guidance into driver supply programs.

Needham analyst Bernie McTernan was one of several analysts who suggested that driver supply could get a boost in early September as supplemental unemployment benefits come to an end. Meanwhile, he notes, “there is still a driver supply imbalance,” with Lyft taking on the burden of investing in both sides of the market—boosting driver pay while holding the line on ride pricing. McTernan keeps his Hold rating on the stock, and finds that there are “more compelling growth opportunities elsewhere in the U.S. mobility market,” an obvious reference to Uber.

MKM Partners analyst Rohit Kulkarni makes a similar point: Lyft has become “an increasingly attractive and tactical play on mass vaccinations and summer travel,” but he prefers Uber. The latter offers both lower valuation and a more diversified bet, with a broader international exposure as well as a food delivery arm, he writes. Making the same point, Atlantic Equities analyst James Cordwell says while results and guidance topped expectations, he’s keeping a Neutral rating on Lyft shares, “given the richer valuation versus Uber.”

Evercore ISI analyst Mark Mahaney, however, away from the results incrementally more positive, repeating his Outperform rating, while adjusting his price target to $76 from $77. But he also notes that challenges remain, with ride availability, wait times, and ride pricing still not optimal.

“Lyft will have to lean aggressively into driver incentives for another quarter or two to rebalance the marketplace,” until vaccines more fully roll out, reopenings unfold, and demand normalizes for work and school commutes and airport trips, he writes. But he adds: “Lyft is proving it can do this while breaking through to sustained Ebitda profitability.”

Write to Eric J. Savitz at eric.savitz@barrons.com

Lyft stock tumbled Wednesday despite its better-than-expected June quarter results, as investors focused instead on disappointment with the third-quarter outlook and the company’s increasing costs for driver incentives.

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Uber Posts Record Bookings as Ridership Rebounds and Delivery Continues to Grow

The Wall Street Journal 04 August, 2021 - 03:11pm

Photo: Al Seib/Los Angeles Times/Getty Images

Uber Technologies Inc.’s ridership rebounded strongly in the most recent quarter from last year’s pandemic lows and its food-delivery showed signs of strength even as in-restaurant dining picked up.

Uber said Wednesday its adjusted loss excluding tax, interest and some costs narrowed to $509 million in the second quarter from $837 million in the year-earlier period. That still missed the average analyst estimate for an adjusted loss before items of $322 million, as the company spent on incentives to woo drivers amid a shortage...

Uber Technologies Inc.’s ridership rebounded strongly in the most recent quarter from last year’s pandemic lows and its food-delivery showed signs of strength even as in-restaurant dining picked up.

Uber said Wednesday its adjusted loss excluding tax, interest and some costs narrowed to $509 million in the second quarter from $837 million in the year-earlier period. That still missed the average analyst estimate for an adjusted loss before items of $322 million, as the company spent on incentives to woo drivers amid a shortage that has driven up passenger fares.

The company said it sees its loss by that measure narrowing to less than $100 million in the current quarter, and said it remains on track to post a profit by that measure by the fourth quarter.

Uber is among the companies that were both walloped by the pandemic, as cities went into lockdown and ridership plummeted, and benefited from people stuck at home turning in record numbers to food delivery. Easing pandemic restrictions boosted Uber’s rides business in the second quarter, but rising Covid-19 infections could dampen prospects in the near-future.

Uber reported record bookings in the second quarter. Its bookings grew 114% year-over-year to $21.9 billion in the three months ended in June. Bookings for Uber Eats, its delivery arm, grew 85% while the rides business more than doubled from the lows of last year.

Bookings allow the company and investors to gauge consumer demand since they represent the total value of trips or food booked on Uber’s platform. Uber earns revenue by taking a cut from bookings. Second-quarter revenue more than doubled.

Uber benefited from people stuck at home during the pandemic turning in record numbers to food delivery.

The company posted a rare net profit of $1.1 billion on the back of gains from its investments in Didi Global Inc. and Aurora Innovation Inc. But Didi’s ongoing woes with regulators in China may negatively impact Uber’s net income in the third quarter.

Rival Lyft Inc. on Tuesday said it turned its first quarterly profit on an adjusted basis excluding taxes and other costs. The company hit that milestone for the first time since its founding, in part because ridership rebounded and it reigned in costs.

But its shares fell more than 10% on Wednesday after it projected revenue for the third quarter that was below analysts’ estimates. Lyft said third-quarter revenue would be hurt by its spending on driver incentives, which it hopes will alleviate the ongoing driver shortage and drive down skyrocketing ride fares in the near-term.

As part of its path to profitability, Uber cut staff and shed non-core businesses. It has also looked for ways to strengthen its booming delivery business, which became a lifeline during the health crisis.

Uber said in February it was buying alcohol-delivery service Drizly for $1.1 billion in stock and cash to expand beyond meal delivery. That came after last year’s $2.65 billion deal for smaller food-delivery rival Postmates Inc.

The company last month also said it was investing in its growing logistics operations with the $2.25 billion acquisition of technology-focused services provider Transplace in a cash and stock deal.

—Preetika Rana contributed to this article.

Write to Meghan Bobrowsky at meghan.bobrowsky@wsj.com

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