Best Stock to Buy Right Now: Uber vs. Lyft

Uber (UBER) and Lyft (LYFT) are two of the biggest names in the ride-hailing industry. While Uber is the clear leader in the U.S. and many international markets, Lyft operates mainly in the United States and Canada and is considered the underdog.

Beyond ride-hailing, Uber has diversified its business by offering food deliveries through Uber Eats, whereas Lyft relies on third-party partners like DoorDash for delivery services. Both companies also feature bike and electric scooter rentals in various cities.

Both Uber and Lyft went public in 2019. As of now, Uber's stock is trading 36% higher than its initial public offering (IPO) price of $45, whereas Lyft's stock has plummeted over 80% from its IPO price of $72. Investors have shown support for Uber due to its efforts in streamlining operations and capitalizing on economies of scale. Meanwhile, Lyft has faced challenges related to slow growth and sustained losses. The question remains: Will Uber continue to outperform Lyft in terms of investment potential?

Growth Comparison

From 2018 to 2023, Uber's gross bookings demonstrated a robust compound annual growth rate (CAGR) of 23%, while its revenue grew at a CAGR of 27%. The number of monthly active users on its platform surged from 91 million in 2018 to 150 million by the end of 2023. Although Uber's ride-hailing segment experienced a decline during the pandemic, it was able to offset this decline with increased food delivery orders through Uber Eats.

For 2024, Uber anticipates a gross bookings growth of 17% to 18%. Analysts predict a total revenue growth of 17% this year, followed by a growth rate of 16% to $50.6 billion by 2025. Factors driving short-term growth include the subscription service Uber One, which has attracted over 25 million members, and initiatives like Uber Teens that allow parents to authorize rides for their teenagers.

Conversely, Lyft reported a 15% CAGR in revenue growth from 2018 to 2023. The company has only recently started sharing annual data on gross bookings in 2023. Its active riders increased from 18.6 million at the end of 2018 to 22.4 million by 2023. Lyft faced a more significant downturn during the pandemic, primarily because it does not offer food deliveries. Additionally, Lyft experienced a more pronounced driver shortage during this crisis, which contributed to increasing average prices.

For 2024, Lyft expects about 17% growth in gross bookings and projects a 31% overall revenue increase for the full year, with further growth of 15% to $6.6 billion anticipated in 2025. Lyft's recent improvements are credited to features like Price Lock, which allows riders to set prices for specific destinations, and its partnership with DoorDash for deliveries.

Profitability Analysis

Both Uber and Lyft assess their financial success through adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA). Uber achieved positive adjusted EBITDA in 2022, with that figure more than doubling in 2023. Lyft also turned positive with its adjusted EBITDA in 2023.

Uber became profitable based on generally accepted accounting principles (GAAP) in 2023, thanks to divesting noncore businesses, downsizing its freight and recruitment sectors, and implementing significant cost-cutting measures. As a result, analysts anticipate a 117% increase in Uber's GAAP earnings per share (EPS) in 2024, followed by a 22% growth in 2025.

In contrast, Lyft remains unprofitable under GAAP standards, though it is making strides in cost reductions to stabilize its operations. Analysts project that Lyft could finally achieve profitability by 2025.

Stock Valuation Comparison

Uber maintains a promising outlook, and its stock appears relatively inexpensive at 15 times next year's adjusted EBITDA. However, recent scrutiny from the Federal Trade Commission regarding Uber One's subscription policies has slightly affected its valuations. On the other hand, Lyft, which is not facing similar investigations, trades at just eight times next year's adjusted EBITDA.

Uber is likely to overcome its current issues in the long run, yet Lyft may present more upside potential at its current price levels. While Lyft is certainly a riskier investment choice compared to Uber, it may be a slightly better buy at this moment.

Stock, Investment, Growth