Lyft (NASDAQ: LYFT)

Shares of the ride-sharing company, Lyft (NASDAQ: LYFT) were down by more than 30% in pre-market trading on Friday after the company’s Q1 outlook left investors disappointed.

This also resulted in dragging down the stock of Uber (UBER), its main competitor. Overall, in the past year, while LYFT has tanked by more than 60%, UBER has fared relatively better with the stock down by only 4%.

Let us take a look at where these two companies stand after their calendar Q4 earnings.

Lyft‘s Long-Term Growth Looks Suspect

Lyft has projected revenues of $975 million in Q1, below consensus estimates of $1.1 billion and a decline of around $200 million from its Q4 revenues. Adjusted EBITDA is expected to range between $5 million to $15 million.

The company’s management admitted on its Q4 earnings call that this weak Q1 outlook is due to multiple headwinds. This included the seasonality factor that results in demand for its transportation network falling during the winter season resulting in less ride sharing. Another factor impacting its outlook is that as driver supply increases, its peak pricing or “prime time is coming down dramatically quarter-over-quarter” resulting in pressuring its revenues and adjusted EBITDA.

Moreover, Lyft also reduced its base price recently facing rising competition that will again adversely affect its Q1 revenues. The company acknowledged the rising competition and admitted that it was looking at significantly reducing its costs and increasing efficiency.

However, these assurances didn’t leave KeyBanc analyst Justin Patterson convinced resulting in the analyst downgrading the stock to a Hold from a Buy as results “cast uncertainty on our view of improving execution and a profit inflection.”

Patterson commented, “With ~2/3 of the q/q decline in revenue coming from less Prime Time activity and reducing prices to match its competitor, we have more questions on whether revenue can achieve mid-to-high teens growth in 2023E. Coupled with more uncertainty on LT targets and category share, we acknowledge we were early on our thesis.”

Uber Better Positioned for Growth

In contrast, Uber delivered a strong earnings beat in Q4 and as CEO Dara Khosrowshahi put it, was its “strongest quarter ever.” In the fourth quarter, the company’s Q4 mobility bookings soared 31% year-over-year to $14.9 billion, exceeding its delivery segment bookings for the first time since the pandemic hit.

Moreover, its mobility consumers exceeded 100 million for the first time in the company’s history. Uber is also seeing accelerating growth when it comes to its food delivery and its subscription service, Uber One.

In Q1, Uber has projected gross bookings in the range of $31 billion to $32 billion while adjusted Ebitda is expected to come in between $660 million and $700 million.

A major difference between Uber and Lyft is that while Uber operates in international markets, Lyft has confined itself to North America. Moreover, Lyft doesn’t have a food delivery business, unlike Uber.

RBC Capital analyst Brad Erickson termed the company’s Q4 results as “unprecedentedly clean.” The analyst added that there is no evidence of a delivery slowdown in the case of UBER and “ads are ramping ahead of the ’24 targets and a focus on GAAP EBIT puts UBER on a path to index inclusion and an expanding shareholder TAM [total addressable market] while driver classification reg concerns are likely overdone, in our view.”

Erickson reiterated a Buy rating and a price target of $46 on the stock implying an upside potential of 28.2% at current levels.

The ETFMG Travel Tech ETF (AWAY) which gives investors access to technology companies in the global travel and tourism industry has lost more than 20% of its value in the past year.