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Lyft’s stock is tanking on driver shortage fears. Uber doesn’t have the same problem

May 4, 2022, 5:35 PM UTC

Whenever a corporate executive drops a reference to the Titanic on an earnings call, it’s probably a pretty bad sign.

That was certainly the case Tuesday evening, when Lyft CEO Logan Green said efforts to boost the number of ride-share drivers are moving as slowly as the ill-fated vessel, requiring an investment in incentives to attract chauffeurs. The unforeseen cost weighed on the company’s second-quarter adjusted earnings guidance, prompting a wicked 33% drop in Lyft shares in midday trading Wednesday.

Green’s comments stood in stark contrast to the optimism emanating Wednesday morning from Uber CEO Dara Khosrowshahi, who moved up the company’s earnings call from post- to pre-opening bell on fears that investors would infer similar supply shortages at his outfit. 

Khosrowshahi said Wednesday morning that Uber’s driver pool remains robust, with no need for added sweeteners. Uber shares still fell 8% in midday trading Wednesday, partially on huge investment losses, but the selloff came nowhere close to its chief competitor.

The quarterly fortunes of Uber and Lyft serve as yet another example of the diverging business models driving two companies that have historically operated in the same lane.

Green framed the weak guidance as an inevitable consequence of the COVID-19 Omicron variant, which depressed ridership and caused drivers to sign off in late 2021 and early 2022. 

With rider demand picking back up, Lyft has struggled to bring enough drivers back into the fold, Green said.

“It’s very, very slow, whereas demand can change on a dime,” Green said on Tuesday’s earnings call. “We feel very confident that this is the right time to put a little extra investment behind ensuring we’re ready to handle that demand and that we’re there providing the best service levels we can.”

Green and his executive team felt less confident in detailing their level of investment, dancing around questions from investors seeking a ballpark dollar figure. Lyft forecasted earnings before interest, tax, depreciation, and amortization of $10 million to $20 million in the second quarter, well off Wall Street estimates of $81 million, per Bloomberg.

Khosrowshahi, meanwhile, trumpeted driver supply gains that comfortably outpaced his rival.

He said active Uber drivers in the U.S. and Canada were up 70% year over year in April. Lyft, which only operates in those two countries, pegged its first-quarter increase at 40%. The trend held steady in new driver additions, with Uber up 120% year over year and Lyft trailing at 70%.

There’s not enough information at our disposal to definitively say why Uber’s driver pool grew at a faster rate. Uber might be drafting off its $250 million–plus driver incentive package launched in April 2021. 

But Khosrowshahi made a compelling case Wednesday in explaining Uber’s advantage: expansion into food delivery.

Khosrowshahi said internal research shows drivers enjoy the flexibility of switching between ride-sharing and food delivery, a product of the company’s dramatic, pandemic-driven pivot to Uber Eats. He added that food delivery, which involves less onboarding red tape, also serves as a good gateway for getting drivers into the Uber universe.

“We’re bringing new drivers on not as Uber Rides, not as Uber Eats, but as Uber as a platform to earn in any way, shape, or form,” Khosrowshahi said. “That’s proving to be a structural advantage, from what we can see, versus the competition—both locally and, we ultimately think, globally.”

The investment in Uber Eats marked one of several big swings taken by Khosrowshahi’s company over the past several years. Uber also expanded internationally, sold off parts of its business to foreign entities, made billion-dollar acquisitions of Postmates and Drizly, and launched a quest to bring millions of taxis into its software fold.

Lyft, meanwhile, moved more cautiously, primarily focusing on building up its ride-hailing market share in North America. 

Time will tell which approach proves best. Uber still posts huge losses in down quarters, including the first quarter of 2022 ($482 million loss from operations, plus a $5.6 billion pretax decline in investments). Lyft also continues to struggle with net losses, which neared $200 million in Q1.

For now, though, it looks likely that Uber’s ambition has put the company in the supply-side driver’s seat.

Want to send thoughts or suggestions for Data Sheet? Drop me a line here.

Jacob Carpenter

NEWSWORTHY

Check your cell phone bill. AT&T announced a rare price hike on existing mobile-service plans Tuesday, a response to rising costs driven up by inflation and higher wages, Bloomberg reported. The change, which will total up to $6 monthly for single-line customers and $12 monthly for families, marks AT&T’s first price increase in three years. CEO John Stankey warned investors last month that higher employee wages could add $1 billion to the company’s expenses this year.

Barbarians at the Gate. Roku is exploring a joint bid to acquire a minority stake in the Starz television brand, a move that could bolster the streaming company’s library of content on its free, ad-supported channel, the Wall Street Journal reported Tuesday. Roku is partnering with private-equity firm Apollo Global Management on a bid for Starz, which is owned by the movie and television production company Lions Gate Entertainment. A partial ownership stake would deepen the ties between Roku and Lions Gate, which closed a deal last month to air the studio’s films on the Roku Channel. Recent Lions Gate hits include the John Wick franchise, Knives Out, and La La Land.

No slowdown here. Chipmaker AMD easily beat analysts’ first-quarter revenue and earnings estimates Tuesday, adding to the list of semiconductor companies posting strong results to start the year, CNBC reported. AMD totaled $5.9 billion in revenue, up 71% year over year, as the California-based company shrugged off concerns that its core personal-computing chip business would lag amid a slowdown in PC sales. AMD shares rose 4% in midday trading Wednesday.

Vacation, all everyone ever wanted. Airbnb topped first-quarter market expectations Tuesday as pandemic fears continued to subside and consumers increased their travel spending, Reuters reported. The vacation-rental company also issued a sunny outlook for second-quarter revenue, projecting sales of $2.03 billion to $2.13 billion, better than the analyst consensus expectation of $1.96 billion. Airbnb shares spiked in early-morning trading Wednesday before settling up 4% in the early afternoon.

FOOD FOR THOUGHT

Anything new to offer? With Facebook bailing on the audio space after just one year, Scott Rosenberg of Axios is starting to wonder when the Meta division will actually succeed at entering a new market. Over the past few years, the Facebook and Instagram parent has made minimal progress with its investments targeting podcasts, cryptocurrency, and encryption. Meta has successfully developed the Stories and Reels brands, but both products are virtual knockoffs of features on Snapchat and TikTok, respectively. Virtual reality and the metaverse represent two possible avenues for a big Meta breakthrough, but both technologies remain years away from any major mainstream success.

From the article:

Facebook has a reputation for quickly cloning competitors’ successful products, but those efforts are often defensive in nature—it’s less important that they thrive than that they intimidate rivals.

Sometimes the company’s flops—like the ill-fated effort to take control of a smartphone operating system—have just been flops.

But the frantic pivots of the last few years suggest a different dynamic is now at work: Rather than failing fast, it looks like Facebook is just flailing.

IN CASE YOU MISSED IT

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Something called a ‘difficulty bomb’ could freeze the entire Ethereum network. What is it, and why is the blockchain delaying action?, by Taylor Locke

ApeCoin surges, then falls, after Elon Musk changes his Twitter profile picture to Bored Ape NFT collage, by Taylor Locke

If you invested in Bored Ape Yacht Club creator’s chaotic metaverse land sale, you’re probably already underwater, by Olga Kharif and Bloomberg

iPod inventor Tony Fadell on how to spot a great idea, by Tony Fadell

BEFORE YOU GO

Killing them loudly? Elon Musk might fashion himself a friend of free speech, but his aerospace company is looking like an enemy of the piping plover. As CNBC reported Tuesday, wildlife investigators suspect SpaceX operations along Texas’s southern Gulf Coast might be scaring or killing off local piping plovers, a sparrow-like bird listed as threatened by federal officials. Investigators estimate that roughly half of the piping plover population has gone poof near SpaceX’s Boca Chica launch site—though it’s not clear what has caused the disappearance. The inquiry stemmed from regulatory approval sought by SpaceX to launch its massive Starship Super Heavy vehicle, which could move to the company’s Florida site if bureaucratic hurdles prove too burdensome.

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