Comparing Uber and Lyft: Which Stock Should You Buy?

Uber (UBER) and Lyft (LYFT) are two of the most recognized names in the ride-hailing industry. Uber has established itself as the market leader not only in the United States but also in various other international markets. Lyft, on the other hand, operates primarily in the U.S. and Canada, positioning itself as the underdog in the sector.

In addition to ride-hailing, Uber offers a broader range of services including food deliveries through Uber Eats. Lyft relies on partnerships for delivery services, primarily through third-party companies like DoorDash. Both companies have also ventured into bike and electric scooter rentals in select urban areas.

Both Uber and Lyft had their IPOs in 2019. Currently, Uber’s stock is trading 36% above its initial public offering (IPO) price of $45, while Lyft’s shares have fallen over 80%, trading below its IPO price of $72. Uber’s ability to streamline its operations and achieve economies of scale has impressed investors, whereas Lyft has grappled with slow growth and ongoing financial losses. This leads to the question: will Uber continue to be a better investment than Lyft moving forward? Let’s delve into both companies to draw a comparison.

Which Company is Experiencing Faster Growth?

From 2018 to 2023, Uber achieved a compound annual growth rate (CAGR) of 23% in gross bookings, along with a 27% CAGR in revenue. The number of active monthly users on its platform surged from 91 million at the end of 2018 to approximately 150 million by the end of 2023. Although Uber’s ride-hailing segment faced declines during the pandemic, this was largely offset by increased food deliveries through Uber Eats.

In anticipation of 2024, Uber projects a gross bookings growth of 17%-18%. Analysts predict a 17% increase in total revenue for this year and a growth of 16% to $50.6 billion by 2025. Key growth drivers will likely include Uber One, its subscription service boasting over 25 million members, Uber Teens for family-friendly ride management, and expanded services in enterprise and healthcare delivery.

In contrast, Lyft’s revenue grew at a 15% CAGR from 2018 to 2023. It only began reporting gross bookings annually in 2023. Lyft’s active riders increased from 18.6 million in 2018 to 22.4 million in 2023. During the 2020 pandemic, Lyft faced greater challenges than Uber, primarily because it did not offer food delivery options and dealt with a shortage of drivers that drove its prices higher.

For 2024, Lyft anticipates approximately 17% growth in gross bookings, following a 14% growth rate in 2023. Analysts expect a significant 31% increase in revenue for the full year and a 15% growth to $6.6 billion in 2025. Lyft attributes this renewed growth to new features like Price Lock, a subscription service for set ride pricing; Lyft Media, which serves ads in its app; and its DoorDash delivery partnership.

Which Company is More Profitable?

Both companies assess their profitability through adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA). Uber achieved positive adjusted EBITDA in 2022, which more than doubled in 2023. Lyft also witnessed its adjusted EBITDA turn positive in 2023.

On a generally accepted accounting principles (GAAP) basis, Uber became profitable in 2023, with a significant profit increase fueled by divesting unprofitable non-core businesses, downsizing its freight and recruitment activities, and implementing substantial cost reductions. Looking ahead, Uber expects to maintain profitability, with analysts forecasting a 117% increase in GAAP earnings per share (EPS) in 2024, followed by a 22% increase in 2025.

Conversely, Lyft has yet to achieve GAAP profitability but is actively working to reduce costs to stabilize its business. The company plans not to pursue international markets like Uber, which may impact its growth strategy. Analysts project Lyft will reach profitability by 2025.

Which Stock Offers Better Value Currently?

Uber appears to have a promising future, with its stock valued at about 15 times next year’s adjusted EBITDA. However, recent scrutiny by the Federal Trade Commission regarding Uber One’s subscription practices has created some pressure on its valuations. On the other hand, Lyft, which is not currently under any similar investigation, trades at a more appealing eight times next year’s adjusted EBITDA.

While Uber is likely to navigate its current issues, Lyft presents an opportunity for slightly more upside potential at its current stock price. Consequently, Lyft, as the less risky option, could represent a better buying opportunity in the near term.

Uber, Lyft, Investment