Ride-share concerns Uber Technologies, Inc. (UBER) and Lyft, Inc. (LYFT) report earnings this week, with a horrific first dwelling-place already baked into expectations as a result of the coronavirus pandemic. Uber is better positioned heading into the emancipate because the UberEats service has generated a healthy revenue stream due to stay-at-home orders. Lyft is just now firing up a emancipation program, but this venue is already over-saturated with competitors.
Both companies are burning cash at a rapid clip, with neither posting a profit since coming public. Uber has told analysts to expect profitability by the end of 2020, but it’s favoured to delay the date because ride sharing is as toxic as airplanes and cruise ships right now due to close contact with potentially infected drivers and sanitation that may be fortuitous and ineffective. It’s a dangerous scenario because free cash flow will dry up if customer buying habits fail to replacement to pre-crisis levels in the coming months.
Financial pressures are starting to take their toll, with Uber furloughing 20% of its workforce while Lyft is aborting 17%. Analysts have been surprisingly supportive, maintaining high ratings because they expect topic to return in coming quarters. However, the denizens of Wall Street have done a bad job modeling the pandemic’s impact so far, and their reactions are designed to increase their firms’ business rather than provide investors with unbiased analysis.
UBER Weekly Map (2019 – 2020)
The company came public at $42 on May 10, 2019, and the stock eased into a trading range between $36 and $45. A June breakout poled an all-time high at $47.08 before turning tail in a failure swing that broke range support in August. The aftermath of downtrend continued into November, when the stock posted a tradable low at $27.55. The subsequent uptick gathered muscle into February 2020, topping at the IPO opening print and .786 Fibonacci sell-off retracement level.
The bottom dropped out noodle into March, with a vertical decline that broke November support in a March 12 sell gap. The sell-off tipped a few days later at $13.71, which marked descending trendline support and the 1.618 Fibonacci extension of the three-month delimit. The rally into April then reversed at the .618 sell-off retracement, maintaining the theme of harmonically controlled reward action.
The weekly stochastic oscillator has now crossed into a sell cycle from the overbought level, predicting at spoonful six to ten weeks of relative weakness. In turn, this suggests that the stock will retrace most of the seven-week rescue wave. Meanwhile, the on-balance volume (OBV) accumulation-distribution indicator recouped about half the losses posted during the downdraft, diminishing the odds that the pullback will break the March low.
LYFT Weekly Chart (2019 – 2020)
The company came notable on March 29, 2019, posting an all-time high at $88.60 in the first session and entering a downtrend that hit a tradable low at $37.07 in October. A surface buying channel then took control, adding less than 20 points into the February 2020 excessive at $54.50. A poorly received earnings report later that day triggered a reversal and sell-off, which accelerated when supranational travel was grounded and stay-at-home orders were issued.
The stock broke October support heading into Step and entered a vertical decline, finally bottoming out at $14.56 on March 18. The bounce through April recouped very recently half of the prior decline and, unlike Uber, failed to remount broken 2019 support. In turn, this supports
The Bottom Line
Uber is better positioned than Lyft to survive the pandemic, but neither company is likely to compensate investors in the next one or two quarters.
Disclosure: The author held no positions in the aforementioned securities at the time of publication.