Barclays: Uber, Lyft ‘Well Positioned’ to Turn a Profit
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A new analysis by Barclays Capital of about 2.4 billion taxi and ride-hailing trips in New York City addresses the biggest question investors have about Uber Technologies Inc. and Lyft Inc.
When will they turn a profit?
The good news, according to analysts Jeffrey Meli, Adam Kelleher, Ryan Preclaw and Ross Sandler, is that Uber and Lyft are well-positioned to achieve profitability.
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The analysis looked at how higher prices affected the number of Uber and Lyft rides, and found that they can raise prices to achieve an operating profit with only a modest impact on volumes, “disproving a key piece of the bear case.”
The introduction of a congestion tax in New York on hailed rides and taxis provided a natural experiment to estimate the price elasticity of demand for ride hailing, the analysts wrote in a note.
The debate couldn’t be more urgent. Uber and Lyft shares have failed to take off after their IPOs earlier this year, with Uber down nearly 39% since its debut, and Lyft down by 37%. Investor sentiment has remained depressed given skepticism about the companies’ ability to make money, as well as regulatory hurdles around the globe — as Uber recently experienced in London.
For their part, Lyft has said it would turn a profit by the end of 2021, while Uber expects to be profitable on an Ebitda basis in 2021.
The analysts also found that the social impact of ride-hailing has been a “net positive,” and that despite a “correlation to gentrification, ride hailing increased rides in the least gentrified neighborhoods by 50 times, and filled a gap in transportation infrastructure.”
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