Silicon Valley's ride-share giants saw their shares tumble Wednesday despite strong revenue growth, as Lyft's ridership trajectory weighed on investors. Its stock fell nearly 30%, dragging Uber lower along the way.
Lyft posted first-quarter revenue of $875 million, a 44% increase over the same period last year. But the number of active riders, 17.8 million, was lower than analysts had expected. There are also concerns about the company's spending as it uses subsidies to attract more drivers onto its platform, according to Wedbush analyst Dan Ives. It posted a net loss of $196.9 million.
Uber reported $6.9 billion in revenue, a 136% spike from the same three months last year. The number of trips fell 3% from the preceding quarter ― a possible reaction to a rise in omicron variant infections ― but climbed 18% from the year-ago period. It recorded a net loss of $5.9 billion, driven by losses from investments in two Asian tech companies and a self-driving car venture.
Both rideshare companies are trying to better position themselves for an expected surge in ridership as the global economy continues its rocky emergence from pandemic conditions. To get there, Lyft said that it would have to spend more on driver incentives in the face of higher gas prices. That didn't sit well with investors, and the stock sank 29.9% to close at $21.56.
Uber says it would not have to make similar investments to attract drivers, and analysts say it appears to be rebounding from the pandemic in a stronger position than Lyft. Even so, shares dropped 4.6% to close at $28.12. The two companies are "Starsky & Hutch from [Wall Street's] perspective and tied at the hip," as Wedbush's Ives put it.
The two stocks fell amid a late afternoon surge that lifted the Dow Jones industrial average more than 932 points, or 2.8%, after the Federal Reserve raised interest rates by half a percentage point. While the increase was the sharpest since 2000 and Fed Chairman Jerome Powell said more increases as high as 0.5 percentage points were "on the table," the markets rallied after he said the Fed board had not seriously discussed bigger rate increases.
Lyft is using driver incentives to ensure it can handle any sudden influx, leading some analysts to express concern that it is spending too much in an uncertain economy.
Adjusting the supply of drivers is "like moving the Titanic," Lyft chief executive Logan Green said on a call with investors Tuesday, while ridership "can change on a dime."
"We feel very confident that this is the right time to put a little extra investment behind ensuring we're ready to handle that demand," Green told investors.