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Uber Stocks Tumble Amid Lyft Pricing Competition Despite First Operating Profit

Unsettling market forecasts and fierce competition caused a fall in Uber shares despite the company making its first operating profit.

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Uber logo

Uber Shares Shaken by Lyft's Competitive Pricing

Uber's stocks suffered a 6% blow on Tuesday after the company cautioned investors about the emerging price competitiveness of Lyft (NASDAQ: LYFT). Uber's earnings projections, considered underwhelming by analysts, caused unease among investors who had previously buoyed the stock value significantly this year.

First Operating Profit Overshadowed by Competitive Concerns

Uber (NYSE: UBER), the ride-hailing giant now 14 years in operation, reported its first-ever quarterly operating profit. However, this landmark achievement was eclipsed by slowing revenue growth and the perceived threat from Lyft. This resulted in Lyft's shares also tumbling by 5%, driven by the concern that aggressive price cuts could damage profitability.

Uber CEO Acknowledges Lyft's Pricing Strategy

Uber CEO Dara Khosrowshahi acknowledged the challenging market environment, highlighting Lyft's strategic pricing measures. He referred to Lyft as a "tough competitor" in the space, a statement that further fueled investor anxiety.

Q3 Earnings Forecast Falls Short of Investor Expectations

Uber's predicted third-quarter adjusted EBITDA, a measure of profitability that's closely observed by investors, ranges from $975 million to $1.025 billion. This projection exceeded the analyst expectations of $925.9 million (Refinitiv data) but still triggered concerns due to Lyft's aggressive pricing strategy.

Lyft Threatens to Break Ride-hailing Duopoly

According to CFRA Research analyst Angelo Zino, Lyft's bold pricing strategy is poised to shake up what has been a relatively "cooperative duopoly" in the ride-hailing market for some time.

Slow Revenue Growth Stirs Investor Concerns

Uber's Q2 revenue rose 14% to $9.23 billion, a figure slightly below the estimated $9.33 billion. This slower-than-expected growth rate, down from 29% the previous quarter and 100% a year earlier, raised eyebrows among investors.

Economic Uncertainty Spurs Driver Numbers

Despite economic pressures, both Uber and Lyft saw an increase in drivers as people sought additional income due to economic uncertainty and inflation. Uber's ride-share business observed a driver increase of 33% year-on-year.

Record EBITDA Margin Amid Profit Announcement

Uber's adjusted EBITDA margin as a percentage of gross bookings reached a record high of 2.7% in Q2. The company also reported an unexpected profit of 18 cents per share, contrasting with the anticipated 1-cent loss.

Uber CFO's Departure

In other news, Uber announced that CFO Nelson Chai would be leaving the company on January 5, adding another element of uncertainty for investors.