Seven stocks in the sharing economy to watch now.
The sharing economy may not seem like the best place to put your money right now -- after all, at a time when sharing can potentially be deadly, investors may be looking for safer places to put their money. But lockdowns won't last forever, and many companies in this space are preparing for big breakouts once quarantines conclude. In fact, while some sharing economy stocks are suffering, others have proven themselves well-equipped to not only survive but thrive during the pandemic. Let's take a look at seven of the biggest stocks to watch in the sharing economy, how they're performing during the pandemic and what the future holds for each.
Uber (ticker: UBER)
Ride-booking services are a hard sell when people are wary of being around one another, and Uber has felt the effects on its bottom line. Although last quarter the company saw revenue grow by 14% year over year, it posted an eye-popping net loss of $2.9 billion. A lot of those losses came from Uber's investments in international ride-hailing companies such as Grab and Didi -- perhaps smart investments in a normal year, but 2020 is far from normal. There are some bright spots in Uber's business. UberEats, for instance, enjoyed a 54% increase in gross sales amid the pandemic, and a potential deal with GrubHub would make the combined company the largest in the burgeoning food delivery market. Uber's business may be stalled for now, but as quarantines end, there's a light at the end of the tunnel.
Lyft is pretty much in the same boat as Uber; in its last earnings announcement, Lyft reported revenue growth of 23%, while posting a net loss of $398.1 million. And much like Uber, Lyft is the subject of a lawsuit from California's attorney general for misclassifying drivers as contractors, a suit that could have business-shattering ramifications. Lyft's focus on ride-hailing leaves the company with fewer avenues of growth than Uber, but there are signs of hope: Rides were up 26% in May compared with April, though they're still down 70% compared with May of last year. Still, it's a good sign that as lockdown orders come to an end around the country, Lyft may be getting back on track. It's one of the key sharing economy stocks to keep an eye on.
GrubHub should be having a banner year. But while the company did report a 12% increase in revenue last quarter, it posted a net loss of $33.4 million compared with earnings of $6.9 million last year. The disconnect is due to the high costs associated with delivery, costs that GrubHub offsets by charging restaurants delivery fees -- something that, as restaurants around the world struggle to stay afloat, the company has been criticized for. And while a potential merger with Uber would go a long way to addressing these issues, U.S. antitrust regulators are sure to get involved. As restaurants across the country reopen, GrubHub will lose business, and investors may want to wait and see if the company can deliver earnings before investing.
Expedia Group (EXPE)
Until Airbnb goes public, Expedia is the best way to invest in the travel side of the sharing economy thanks to brands like HomeAway, VRBO and a slew of other travel-related companies. But like every company even slightly related to the travel industry, Expedia has had a difficult 2020; the company reported a 15% decline in revenue thanks to big drops in airline and advertising sales, and it posted a loss of $1.83 per share this past quarter. That said, companies like Airbnb are reporting renewed demand as stay-at-home orders are lifted from travelers who would prefer to stay in a house rather than a hotel, and analysts see a big upside for the travel industry. But until demand becomes sustainable and certain, investors should be prepared for a bumpy road ahead.
Roughly 96% of Yelp's revenue comes from advertising. Right now, advertisers are cutting their budgets left and right to save money -- in fact, many of Yelp's customers are small businesses that are closed for now, if not permanently. On top of that, with no one going out to eat, few people are using its platform anyway -- page views for restaurants declined 60% last quarter, while page views for services dropped 40%. The result was a net loss of $16 million in the company's first quarter, compared with a $1 million profit last year. Cost-saving measures like reducing its workforce combined with no debt on its balance sheet mean Yelp will survive this crisis -- but it's a risky investment before customers are absolutely positive that leaving their homes is safe.
Match Group (MTCH)
Match Group's success is predicated on users meeting up for dates -- and seeing as nobody can meet up right now, you'd think the company would be in dire straits. Yet Match Group has remained resilient thanks to a surge in both new users (up 15% year-over-year last quarter) and new all-time highs in daily active users. With nothing to do and nowhere to go, people are chatting it up, and the average number of daily messages on Match Group's services has grown 27% between the last week of February and the month of April. When lockdowns around the world do conclude, people will want to get out of their homes and live a little, and Match Group should be very well-positioned to catch that wave.
PayPal makes digital payments between people and businesses easy and efficient, and right now, that's exactly what customers want. The company already had an enviably high share of the digital payments market, a market that has grown rapidly with people stuck at home and shopping online. But the pandemic has been a boon to PayPal in other ways, too; the company has helped distribute more than $1 billion in stimulus funding, bringing more people to its platform, and has developed new touch-free QR codes to help people pay in-person without putting their health at risk. It's no wonder that shares of PayPal are up more than 45% year to date, and even after lockdowns end, there will always be a place in an investor's portfolio for the best digital payment system in the industry.
The top sharing economy stocks to watch in 2020:
-- Uber (UBER)
-- Lyft (LYFT)
-- GrubHub (GRUB)
-- Expedia Group (EXPE)
-- Yelp (YELP)
-- Match Group (MTCH)
-- PayPal (PYPL)
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