(Reuters) – Lyft’s shares tumbled nearly 8% as investors feared the ride-hailing platform’s focus on competitive pricing to gain market share would muddy its path to profitability.
Lyft and its more dominant rival, Uber, have been locked in a fierce price war as they stage a post-pandemic recovery.
Lyft said on Tuesday it expects an operating profit of $75 million to $85 million for the current quarter. In contrast, Uber has already posted a quarterly operating profit, taking advantage of higher prices and a diversified business model that includes freight brokerage and food delivery.
“While Lyft appears to be regaining ground with a more competitive offering, the profit outlook in the out-years remains murky,” said BTIG analyst Jake Fuller.
Uber said last week that its rider volumes were back to pre-pandemic levels in North America on an industry-wide demand uptick due to a gradual return to work and travel demand.
Meanwhile, Lyft’s pricing strategy, which rendered average per-mile fare to be 10% lower when compared with last year, helped the number of active riders on the platform grow about 8% in the quarter.
The company also said it planned on to phase out prime-time pricing or surge pricing, as riders “hate it with a fiery passion.” Surge prices fell 35% in the second quarter, from the prior three month-period.
Lyft, which Uber CEO Dara Khosrowshahi termed a “tough competitor” last week, has a forward price-to-earnings multiple, a common benchmark for valuing stocks, of 29.66, compared with Uber’s 55.27.
(Reporting by Akash Sriram in Bengaluru; Editing by Saumyadeb Chakrabarty)
Credit: The Star : Tech Feed
