When it comes to ride-hailing giants, Uber and Lyft, both have a dominant place in the market. Uber is the global leader, operating in numerous countries, while Lyft is primarily U.S.-focused and plays the underdog role. Both companies went public in 2019, with Uber’s stock performing relatively better than Lyft’s, which has seen a significant drop in value since its IPO.
The big question for investors today: Which of these stocks is the better buy?
1. Which Company Is Growing Faster?
Uber has shown impressive growth since its IPO:
- Gross bookings grew at a compound annual growth rate (CAGR) of 23% from 2018 to 2023, while revenue grew at a CAGR of 27%.
- Its monthly active users increased from 91 million in 2018 to 150 million by the end of 2023.
- Despite a slowdown in ride-hailing during the pandemic, Uber offset this with Uber Eats, its food delivery business.
- For 2024, Uber expects gross bookings to grow 17%-18%, with analysts projecting a 17% increase in total revenue for the year. Additionally, its Uber One subscription service, with 25 million members, is expected to drive future growth.
In comparison, Lyft has had a more challenging time:
- Lyft’s revenue CAGR from 2018 to 2023 was 15%, significantly lower than Uber’s.
- Active riders grew from 18.6 million in 2018 to 22.4 million by the end of 2023.
- Lyft didn’t have the advantage of a food delivery service like Uber and struggled with driver shortages during the pandemic, leading to higher prices.
- Lyft expects its gross bookings to grow 17% in 2024, with analysts expecting a 31% increase in revenue for the full year, and 15% growth in 2025.
Verdict: Uber has been growing faster in recent years, especially given its expansion into new services like Uber Eats and its large international footprint. However, Lyft has been accelerating its growth in 2024, making it an interesting player to watch in the short term.
2. Which Company Is More Profitable?
Uber turned profitable in 2023, with its profit spiking after it divested non-core businesses, cut costs, and streamlined its operations. It expects to remain profitable in the coming years, with 117% growth in earnings per share (EPS) expected in 2024, followed by 22% growth in 2025.
Lyft, on the other hand, has struggled with profitability. While it turned positive adjusted EBITDA in 2023, it’s still unprofitable on a GAAP basis. Analysts expect it to turn profitable by 2025.
Verdict: Uber has proven to be more profitable, having turned a profit ahead of Lyft. Its strong cost-cutting measures and strategic focus have paid off. Lyft still has some catching up to do.
3. Which Stock Is the Better Value Right Now?
Uber’s stock trades at 15 times next year’s adjusted EBITDA. Despite its strong future prospects, it is facing some headwinds, particularly the Federal Trade Commission probe of its Uber One subscription policies, which has put some pressure on its stock.
Lyft’s stock, meanwhile, is trading at just 8 times next year’s adjusted EBITDA. This makes it more attractive on a valuation basis. While Lyft is riskier, its lower valuation could offer more upside potential compared to Uber at these levels.
Verdict: While Uber has a better long-term growth trajectory, Lyft is currently a better value in terms of stock price. Its lower valuation and the potential for a rebound in its business make it a compelling choice, albeit a riskier one.
Conclusion: Uber or Lyft?
Uber is the safer bet for long-term growth, with its international footprint, profitable business model, and diverse revenue streams from ride-hailing to Uber Eats. It is likely to continue outperforming in the coming years, making it a strong pick for growth-focused investors.
Lyft, while still struggling with profitability, presents an opportunity for investors looking for a higher-risk, higher-reward play. Its lower valuation and efforts to diversify its services (e.g., partnerships with DoorDash and new features like Price Lock) could yield strong returns if the company successfully turns its business around.
If you’re looking for stability and consistent growth, Uber is the better choice. However, if you’re willing to take on more risk for potentially higher rewards, Lyft could be the stock with more upside potential at current levels.
Should you invest $1,000 in Uber Technologies right now?
While Uber is a strong company with good growth prospects, the Motley Fool Stock Advisor team has identified other stocks they believe have better potential at the moment. Investors looking for opportunities with even higher upside might want to consider their recommendations, as they have historically outperformed the market.
In the case of Lyft, it might be worth considering if you’re looking for short-term opportunities with a lower valuation, though its recovery is uncertain.
Ultimately, both stocks offer unique opportunities depending on your risk tolerance and investment horizon.
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