On February 12, Lyft's shares dropped by approximately 9% following the company's warning that the downward pricing trend from late last year is likely to persist in 2025 as it aims to align prices with its larger competitor, Uber.
In its efforts to attract customers and drivers to its platform, Lyft has been actively keeping prices competitive and introducing new features distinguishing it from Uber. Nevertheless, Lyft reported a decline in prices during the fourth quarter of last year, a trend that has persisted into the current year. The company had to lower fares and increase promotional coupons in the final weeks of 2024 to maintain competitiveness.
Conversely, Uber announced that it anticipates a slight increase in prices for its UberX service due to rising insurance costs being passed on to consumers. Analysts at Bernstein noted the shift in incentives from drivers to consumers within the U.S. rideshare industry, emphasizing the need for a balanced approach.
Lyft expressed confidence in its ability to adjust incentives to manage supply and demand effectively due to its substantial number of drivers on the platform. Analysts from Needham predicted prolonged lower prices, which will test the demand elasticity within the industry.
Following Lyft's fourth-quarter results, thirteen brokerages reduced their price targets for Lyft stock, lowering the median target to $18 as compiled by LSEG data. Lyft reported gross bookings below Wall Street projections, echoing Uber's performance from the previous week.
Lyft's 12-month forward price-to-earnings ratio stands at 13.4, contrasting with Uber's 29.4. While Lyft's shares declined by 13.9% in 2024, they have risen by 11.6% year-to-date. Lyft's market capitalization could potentially decrease by over $500 million to approximately $5.4 billion if current losses persist. Uber's shares also experienced a 3% decrease on the same day.