30% Post-earning Drop, What's wrong with the recovery theme darling, Lyft?

Both companies’ stocks have been under-performing Nasdaq by a lot in the past year. And “a lot” is probably an understatement. They are direct competitors in the ride-sharing market. Uber has more global footprint and Lyft is more focused with U.S. market. Based on price action, it looks like Uber started to outperform since July, did Uber recover its business faster than Lyft?

Uber’s active consumers and drivers have reached all-time high and surpassed pre-pandemic level. On the other hand, Lyft has not reached Q120 level yet and Q4 showed weakness in growth compared to Q3. That means Uber is winning by taking more market share! In reaction to that, Lyft has lower the base fare to stay competitive. And as a result, its Q1 guidance is lower than what market anticipated which should contribute to the decline of 30% in after-market.

The other problem that investors hate at the moment is Stock-based Compensation. Uber's market cap is currently around $72B and its year 2022 SBC was at $1.8B or 2.5% dilution which seems reasonable. But Lyft is a different monster when it comes to SBC, before today’s decline of 30%, its market cap was $5.7B and its year 2022 SBC was overwhelmingly at $750M, that is over 13% of dilution if they keep using SBC to reward their employees. At this point, if the stock keeps dropping for Lyft, it may very well be acquired by Uber at some point in the future. Management needs to cut back on expense and in particular SBC. The stock is basically dead until we see clear action taken by the management to reduce cost.

Disclosure: The author does not own Lyft or Uber at the time of this writing and this is not financial advice