For different reasons, financial services group Nomura recently downgraded both Uber and Lyft, Seeking Alpha reported Friday (Dec. 29).
Uber, the dominant player in the ridesharing industry, reported an 11% increase in revenue in the third quarter of 2023 compared to the previous year, according to the report. This growth contributed to Uber’s overall strong financial performance and was reflected in its share price, which increased by 141% in 2023.
Lyft showed a 10% gain in revenue year over year in 2023, together with a 43% increase in its share price, the report said.
Looking ahead, though, Nomura recently downgraded both Uber and Lyft, per the report.
The analyst said Lyft faces a more challenging environment and difficult business conditions, according to the report. Lyft’s challenges include a slowdown of the recent rebound in travel and a lack of cross-selling opportunities, which limits its top-line growth.
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Nomura’s downgrade of Uber reflects an outlook for limited upside in its share price valuation following the outsized gain it made in 2023, the report said.
“In our view, investors have rewarded the company for profitably scaling its business model and consolidating market position,” Nomura said, per the report.
While both Uber and Lyft have ride-hailing as their central, core business, Uber has developed a broader platform that provides more opportunities for users and drivers to pivot between activities without leaving the ecosystem, PYMNTS reported in February.
Lyft has focused on mobility — getting people from one place to another — while Uber has added food delivery and freight to the mix, cross-pollinating its offerings and diversifying its revenue streams.
In November, this divergence continued to widen, with Lyft concentrating its efforts on transportation and Uber continuing as a launching pad into food delivery and freight.
At the same time, the rising tide of travel demand has lifted the core business of both companies. Lyft reported that in the third quarter it saw rides grow by 25%. Uber reported that gross bookings for rides were up 31% and delivery bookings gained 18%.
