In recent years, the global ride-sharing market has experienced significant growth. The key drivers behind this growth include the widespread use of smartphones, urbanization trends, the allure of affordable transportation options, and the increasing popularity of flexible, on-demand services.

Although the industry is anticipated to keep growing in the coming years, not every stock in this space is poised to thrive. After assessing Uber Technologies, Inc. (UBER) and Lyft, Inc. (LYFT) in this context, I find UBER to be worth monitoring, while I recommend exercising caution with LYFT at present.

Before delving deeper into the fundamentals of these stocks to understand why they may not be the right picks now, let’s discuss what’s shaping the industry’s prospects.

The ride-sharing industry is positioned for substantial growth in the upcoming years, driven by key factors such as advancements in autonomous vehicle technology and a heightened emphasis on sustainability initiatives. These elements, along with efforts to expand services into underserved and rural areas, contribute to the industry's potential for significant expansion.

According to a recent report by ResearchAndMarkets.com, the global ride-sharing market is projected to experience robust growth, with an expected increase from $112.24 billion in 2023 to $134.09 billion in 2024. This upward trajectory is indicative of a notable uptick, and the market is forecasted to reach an impressive $280.91 billion by 2028, registering a CAGR of 20.3%.

Amid this backdrop, let’s take a look at the fundamentals of the featured stocks from the Technology - Services industry, starting with the one ranked lower from the investment point of view.

Stock #2: Lyft, Inc. (LYFT)

LYFT operates a peer-to-peer marketplace for on-demand ride-sharing in the United States and Canada. The company operates multimodal transportation networks that offer riders personalized and on-demand access to various mobility options.

LYFT’s 0.14% trailing-12-month levered FCF margin is 97.6% lower than the 5.92% industry average.

For the third quarter that ended September 30, 2023, LYFT’s revenue came in at $1.16 billion. Its loss from operations narrowed 86.2% year-over-year to $40.18 million. Its adjusted net income came in at $92.30 million, compared to an adjusted net loss of $56.10 million in the prior-year quarter. However, the company’s net loss per share narrowed by 97.5% over the prior-year quarter to $0.03.

Analysts expect LYFT’s EPS for the quarter ending June 30, 2024, to decrease 35.2% year-over-year to $0.10. Over the past month, LYFT’s stock has declined 18.4% to close the last trading session at $12.76.

LYFT’s POWR Ratings reflect its bleak outlook. The stock has an overall rating of D, equating to a Sell in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

It has a D grade for Momentum, Stability, and Sentiment. It is ranked #62 out of 76 stocks in the Technology - Services industry. Beyond what we stated above, we have also given LYFT grades for Growth, Value, and Quality. Get all LYFT ratings here.

Stock #1: Uber Technologies, Inc. (UBER)

UBER develops and operates proprietary technology applications in the United States, Canada, Latin America, Europe, the Middle East, Africa, and Asia, excluding China and Southeast Asia. It operates through three segments: Mobility, Delivery, and Freight.

In terms of the trailing-12-month Return on Common Equity, UBER’s 13.50% is 10.9% higher than the 12.17% industry average. Its 1.07x trailing-12-month asset turnover ratio is 32% higher than the 0.81x industry average. However, the stock’s 0.88% trailing-12-month EBIT margin is 91.1% lower than the 9.83% industry average.

For the third quarter ended September 30, 2023, UBER’s revenue increased 11.4% year-over-year to $9.29 billion. Its net income attributable to UBER and EPS came in at $221 million and $0.10, respectively, compared to a net loss of $1.21 billion and $0.61 in the year-ago quarter.

On the other hand, its total costs and expenses increased marginally year-over-year to $8.90 million as of September 30, 2023.

Street expects UBER’s revenue for the quarter ending December 31, 2023, to decrease 13.6% year-over-year to $9.77 billion. On the other hand, its EPS for the same quarter is expected to decrease 42.7% year-over-year to $0.17. Over the past nine months, the stock has gained 104.5% to close the last trading session at $64.88.

UBER’s POWR Ratings reflect uncertainty. It has an overall rating of C, which translates to a Neutral in our proprietary rating system.

It has a C grade for Growth, Stability, and Sentiment. It is ranked #49 in the same industry. To see UBER’s ratings for Value, Momentum, and Quality, click here.

What To Do Next?

43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.

2024 Stock Market Outlook >

UBER shares were trading at $64.75 per share on Friday morning, down $0.13 (-0.20%). Year-to-date, UBER has gained 5.16%, versus a 0.50% rise in the benchmark S&P 500 index during the same period.

Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.

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