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‘Expect very strong results out of Uber’: Analyst

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Angelo Zino, Senior Industry Analyst at CFRA Research, joins Yahoo Finance to discuss Lyft’s earnings and expectations as Uber readies to release their results Q2 results.

Video Transcript

KRISTIN MYERS: And welcome back. Lyft reported earnings and they beat estimates, though the stock right now is under a lot of pressure-- down right now about 9.5%. And fellow ride-share company Uber is expected to report after the bell today. So let's chat about both of these companies. We're joined now by Angelo Zino, Senior Industry Analyst at CFRA Research.

Angelo, great to have you here with us. So I just first want your reaction to the Lyft earnings. I think it's always a question that so many folks have why we see a stock under pressure after it does report a beat-- it did report a loss, however, the loss was smaller than some analysts had been expecting. What do you think is causing Lyft right now to be in the red, down 9.5%?

ANGELO ZINO: Yeah, no, I mean, especially following the reversal after hours where the stock was up sharply, right? So you look at the overall results, the Q2 results were absolutely fantastic-- growing, you know, 125%. The other new active riders were a great figure out there in terms of 17.1 million, the fact that they saw adjusted EBITDA profitability we think was a huge positive a quarter earlier than anticipated. And then when you kind of look at the Q3 guidance also, it was also above expectations-- both on a topline basis as well as on an adjusted EBITDA basis.

Now, you know, why the stock is underperforming as much as it is despite the better than expected results, I'd say a big reason for it, I think, is probably because of the heightened investments that they kind of guided towards in the third quarter and likely potentially in the fourth quarter. I think a lot of people are questioning whether the number we saw in terms of adjusted EBITDA profitability is sustainable.

We think it is, but there's clearly going to be some choppiness. Now, also, you've got the Delta virus kind of lingering out there and the impact there kind of going into the winter months also could maybe be a certain factor out there for investors. But all in all, we do think the results were very good for Lyft as well as a good indication for Uber ahead of the results tonight, at least in terms of their mobility business.

ALEXIS CHRISTOFOROUS: Let's talk a little bit more about what you're expecting from Uber. I know the Street is still looking for another loss per share. But they are forecasting revenue to expand for the first time since the first quarter of 2020. So tell us what you're going to be looking for tonight from Uber.

ANGELO ZINO: Yeah. I mean, in terms of Uber, I think you kind of have to separate this into the two sides, right? In terms of the mobility side of things, again, when you think about the ride-sharing market, at least in the US, it's about a 70/30 split in terms of Uber and Lyft. And I would anticipate that mobility would be a beat, given what we saw out of Lyft's side of things. Now, clearly, there's also a geographic difference between the two sides, but we do think the momentum remains very good geographically overseas.

Now, on the delivery side of things, I think it's more along the lines of the sustainability of orders. It's not necessarily whether or not they're going to see some significant growth. We do see some significant growth just because of the easy bar in a post-pandemic world. But I think it's all about, are they seeing some of that incremental growth in adjacent markets like groceries as well as the momentum from acquisitions like Drizly and PostMates that can offset maybe some of the lower order take rates that we're potentially going to see a delivery side of things? But all in all, I would expect very strong results out of Uber. I think it's going to be more along the lines of kind of how they guide towards Q3 and kind of the commentary they provide on the cost side of things as far as the supply-- the supply constraints are concerned.

KRISTIN MYERS: Angelo, I want to ask you about something that's been impacting both Lyft and Uber, and that, essentially, is a driver shortage. I have just noticed even recently whenever I've tried to book an Uber or even a Lyft that some of the prices are much, much, much higher than I would normally expect. I've had friends just anecdotally just say, listen, I'm not going to pay some of these higher prices on Uber. I'm actually going to go back to taxis, believe it or not.

It's been years, I think, since any of us have ever used a taxi, frankly. How much do you think those driver shortages are going to continue to weigh on those two companies?

ANGELO ZINO: Yeah, no, I think that's a great question. And you know, clearly, the supply constraints, the driver constraints are having an impact here. Our view, when you kind of look at what Lyft said last night-- increasing driver supply by about 50% in the second quarter and again, significant investments going into the third quarter here-- I mean, clearly, nobody out there wants to be paying these higher prices that you've seen, on top of that having these longer wait times.

Our view, though, is as you kind of go into this September month, especially kind of as you get that benefits cliff here in the US, that should improve the actual supply situation for Uber. Most drivers out there utilize Uber for the main reason of kind of getting that incremental kind of excess money on the side. So that being said, we do see significant improvement as we kind of go into the September and October months.

And I think that should help improve the actual volume for this business. But at the same time, the headwind is going to be that you're going to see some pricing rollover.