On Friday, the stock price of Lyft Inc (LYFT.O) saw a decrease of 35% due to a bleak outlook. This raised concerns that the company might have to lower its prices and accept lower profits in order to remain competitive with its primary rival, Uber (UBER.N), in the North American ride-sharing industry.
Both companies have been engaged in a struggle to capture a larger share of the market, following the decline during the pandemic.
According to Nikhil Devnani, an analyst at Bernstein, “Uber has an advantage due to its worldwide ridesharing strategy and international markets have recovered more quickly than the U.S.”
“As the larger platform, Uber is able to provide more opportunities for drivers, not only in the realm of ridesharing but also with its recent expansion into food and grocery delivery.”
Lyft’s shares experienced their largest single-day decline to date, with 13 analysts revising their target prices downwards. As a result, the company was poised to lose approximately $2 billion in market value and nearly all of its year-to-date stock price increases.
On Thursday, Lyft presented its first quarter profit and revenue projections which were below what the market was anticipating, in sharp contrast to Uber’s robust profit projection and better-than-anticipated earnings report.
According to Canaccord Genuity, “This outlook persists the recent pattern of Lyft growing at a slower pace compared to the overall ridesharing market.” The firm also stated that the improvement in the availability of drivers will put pressure on the company’s pricing.
In recent months, drivers have returned to ride-sharing companies as they seek a stable source of income in a challenging economy, which has enabled both Uber and Lyft to reduce their incentives.