Ridesharing giants Uber and Lyft achieved good results in 2023, the main one being revenue growth, but 2024 will be a period of difficulties for them.
Nomura Financial Services Group recently downgraded the ratings of the mentioned companies. This was reported by the media at the end of last week.
Nomura downgraded Lyft’s rating from neutral to reduced. Uber’s rating has been changed from recommended to buy to neutral. Both companies have surpassed the S&P 500 this year.
Uber is currently a major player in the ridesharing industry. In the third quarter of 2023, the revenue indicator of this company showed an increase of 11% year-on-year. This positive dynamic contributed to the firm’s overall strong financial results. The company’s share price increased by 141% in 2023.
Lyft’s revenue last year also showed a positive dynamic. In 2023, this indicator showed an increase of 10%. The company’s share price increased by 43% last year. At the same time, the brand’s securities are characterized by a high level of volatility.
Nomura analysts believe that in 2024 Lyft will operate in an environment with more difficult conditions. Experts also noted that doing business this year will become more problematic. Analysts noted that the main difficulty of the brand at the moment is the slowdown in the number of rides. Also, according to them, the lack of cross-selling opportunities is a factor of negative impact on the firm’s business. This circumstance is the reason for limiting revenue growth.
The downgrade of Uber by Nomura analysts reflects the forecast that in 2024 the company’s share price growth will be limited after the significant success achieved last year. Experts say that investors have rewarded the brand for scaling its business model. Also, according to them, a positive factor influencing the perception of the company in the investment environment was the strengthening of its market position.
For Uber and Lyft, ride management is a central focus. At the same time, Uber is striving to expand the space of its business in terms of functionality. The company has improved its platform, giving drivers and users more opportunities to pivot between activities without leaving the corporate ecosystem. Uber also provides food delivery and freight services. The company is actively diversifying its sources of income.
Lyft, as part of its development, is focused on mobility, which means efficiently transporting people from one place to another.
Lyft and Uber are players in the same market, but the content of their activities is different in terms of business versatility. Lyft is focused on providing transportation-related services. At the same time, Uber is strengthening its status as a launch platform for food delivery and freight transportation.
The growing travel demand has become the basis for improving the core business for both companies. In the third quarter of 2023, the number of trips made to Lyft customers increased by 25% year-on-year. Over the same period, Uber recorded a 31% increase in the number of ride bookings compared to a year ago. The company also reported that the number of delivery orders in the third quarter of last year increased by 18% year-on-year.
As we have reported earlier, Uber for Business Adds Integrations With Expense Management Providers.