Ridesharing Rivals: Uber & Lyft Q1 earnings preview

The pandemic hasn’t been kind (to say the least) to ridesharing companies like Uber and Lyft, and as such it came as no surprise when their respective share prices took a hit over a year ago when lockdowns were first put in place for their key markets. Since then, however, it’s been a story of reopening and, in turn, long-term recovery when it comes to share prices, especially following successive vaccine news late last year. This is especially the case for Lyft as it relies more on lift sharing than does Uber, with its more diversified strengths.

In fact, demand has increased so much that both companies have had to offer incentives for US drivers amid supply lags, and as earnings for drivers are now above pre-pandemic levels. One issue that remains is the classification of workers as employees, following a decision earlier this year that classified Uber drivers as such. As such, comments from the US labor secretary last week that “in a lot of cases gig workers should be classified as employees”, sent share prices of both companies plummeting.

When do Lyft and Uber announce their results?

Both companies will release their figures this week: Lyft going first on Tuesday May 4th, while Uber is the day after that.

Lyft share price: forecasts from Q1 results

Although the company managed to beat estimates last time around on the earnings per share (EPS) front, it’s been a story of successive losses and that’s expected to remain the case for the first quarter of the year, even if hopes are the loss will be smaller - around $-0.53 per share. And, while Lyft recently sold its self-driving unit to Toyota for over half a billion dollars, this did not occur in time to appear in earnings for this quarter. Analyst ratings remain majority buy, with price targets averaging above its current share price.

Trading Lyft’s Q1 results: technical overview and trading strategies

On average, Lyft has experienced more volatility than Uber. That means up-days for ridesharing offers decent gains for Uber’s share prices, and more so for Lyft. However, it also means that on days of retracement, the likes of which we saw late last week, it’s Lyft that suffers a bigger percentage drop. This is especially true given Lyft’s exposure to the US market on the latest comments from the labor secretary, as opposed to Uber that’s more diversified globally.

<>Of course, they aren’t always pointing in the same direction, a theme that’ll likely preside should there be a real contrast in earnings from the two rivals this week. It’s for that reason that the technical overviews can at times differ, even if they end the day pointing in the same direction. The technicals on the longer-term weekly timeframe are mixed in terms of price with regards to their short and long-term weekly moving averages, with both showing a trending Average Directional Movement Index (ADX). And, while the picture might appear similar when zooming in to the daily timeframe, the increased volatility for Lyft is showing an RSI moving closer to oversold territory, and its price not just piercing the lower end of the Bollinger Band – as is the case with Uber’s share price – but showing signs of walking it. Technicals mean little in the face of a fundamental event, and that means levels are easily at risk of breaking especially if results veer far from expectations, and would potentially give conformist breakout strategies that outperformed last week an edge over contrarian reversals.

Lyft Shares Daily chart

Uber share price: forecasts from Q1 results

After slightly beating estimates on the earnings front over the past two quarters, expectations are for another loss and an EPS of $-0.56. Ride volumes are expected to be lower than pre-pandemic numbers but are where its delivery business may show a decent figure. Uber’s announcement in March regarding record gross bookings has been a clear positive, but the negative over the past quarter is taking into consideration the UK’s classification for its drivers as workers.

Analyst price targets vary widely, with an average well above current prices as most recommend a buy, and by a clearer margin than that for Lyft.

Trading Uber’s Q1 results: technical overview and trading strategies

Here too, technicals, and in turn overview and levels will hold less relevance going into Tuesday’s fundamental event. That being said, the overview is consolidatory - in the short-term its price at the lower end of the band, beneath its key moving averages, and with a negative Directional Movement Index (DMI). A lack of news might have seen conformist strategies outperform, but given we could be in for another big move on the release, contrarian breakout strategies can’t be ruled out. A cautious approach for contrarian traders would be to wait for key levels to break/breach significantly before initiating, only if price recovers to that level.

Uber Shares Daily chart

IG Client sentiment* and short interest for Uber shares and Lyft shares

Short interest for Lyft shares has increased since the same time last year, whe it was above 17 million. The latest shows its above 25 million, and nearly 10% of outstanding shares. Short interest for Uber shares has also risen from about 45 million shares a year ago to 65 million, and more than that of Lyft in absolute terms. However, given it has more than six times as many shares as its rival, the percentage short is roughly half that at over 4%, and in turn is the less shorted stock overall.

When it comes to sentiment amongst retail traders, IG’s client sentiment shows they are holding an extreme buy bias of 91% for Uber. In general, when it comes to tech stocks (FAANG+TM), they hold heavy to extreme long bias that’s consistent regardless of whether share prices experience a pullback.