RBC Capital Markets Internet Analyst Brad Erickson joins Yahoo Finance Live to discuss Lyft’s decision to appoint former Amazon retail exec David Risher as the rideshare giant’s new CEO, competition with Uber, the driver shortage, and the outlook for Lyft.
Video Transcript
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JULIE HYMAN: Lyft announced that its CEO, Logan Green, and president, John Zimmer, are going to step aside, making way for incoming CEO David Risher, who's a former retail executive at Amazon. Risher going to take on that CEO role on April 17. Green and Zimmer will transition to serve solely on the board.
Let's bring in RBC Capital Markets Internet Analyst Brad Erickson. Brad, it's great to see you. So is this--
BRAD ERICKSON: You too.
JULIE HYMAN: Is this the solution that Lyft needed? Right? It's, sort of, a distant second to Uber at this point in ride share. Is this new guy going to fix it?
BRAD ERICKSON: Yeah. I think, you know, we-- when we saw the news last night, we came out with some comments, and I think we kind of framed it as more of, like, a "hey, why not type" situation, right? These guys have really struggled with, you know, various aspects of-- we'll call it misexecution and market challenges, competitive challenges. And we think they're operating at a structural disadvantage to Uber, specifically here in the US.
And so, yeah, I think getting a fresh set of eyes on things-- the founders-- this is obviously a very emotional thing for the founders. I think getting them to step away more in a board capacity, less operationally so, you bring this guy in who is presumably a very good operator, certainly with some long track record of experience at Amazon, and we'll see what he can do. The details on the shareholder letter were scant, I would say, at this point, but apparently, they're holding an all-hands meeting today with the company. And, you know, probably likely to see more details emerge here on any new strategic initiatives.
BRAD SMITH: Brad, Julie knows that one of my favorite "Harvard Business Review" stats to cite is the fact that after three years, for a company being public, if their cofounder-- cofounders or founder are still at the CEO helm, they tend to not see that show up in terms of the stock price reaction and it actually resulting in positive shareholder value. So this, no doubt, perhaps a good move for shareholders, but at the end of the day, shareholders probably still asking, what applicable experience does Risher have that can easily translate over into a ride-hailing business?
BRAD ERICKSON: Yeah. I mean, I think, clearly, you know, when you go back to whether it's the Microsoft portion of his career or certainly the Amazon portion, you know, this is-- Lyft is a two-sided marketplace. After all, digital marketplaces often have many of the same characteristics. And certainly, he was the 37th employee at Amazon, arguably the biggest two-sided marketplace of all time in the world. And so I think that's kind of the most established statement we can make at this point about what his experience level is.
But certainly, when it comes to the aspect of, you know, new customer acquisition, you know, running a business that's fairly low margin inherently but needs to ramp in the eyes of shareholders over time, you know, there's certainly some experience there. We'll see how he does, as I said.
JULIE HYMAN: Brad, to be clear, you guys aren't stepping in to, you know, buy this thing on this news. And you say in your note, the challenge from here-- address the structural disadvantage versus Uber. But how? And that really is the big question, right? I mean, how do they do that?
BRAD ERICKSON: Yeah. I mean, [CHUCKLES] we don't know. And yes, we are not stepping in, even with this headline. Yeah. I mean, I think we also came out with an analysis just last night to kind of further support that view of Uber having a structural advantage. And I'll just give you two examples. You know, we took a look at, kind of, the 10 largest markets in the US competitively, kind of, side-by-side rides, and what we continue to find is Uber is driving declines in their pickup time, so meaning it's a shorter wait to get an Uber than a Lyft, and that's changing in favor of Uber.
And so that drives conversion. And then, separately, we're continuing to see evidence that Lyft is having to cut price, which we view as a reflection of needing to, sort of, stave off further market-share losses. And so, you know, that's a very, very tough, compounding, sort of, virtuous cycle to stop once you're going down that road. As I said, management teams got its work cut out for them, I would say.
BRAD SMITH: Previously, we've talked about the need for more drivers to come online, as well, in order to have either prices come down for riders and then even for, as you were mentioning, the wait times to decrease as well. Is that something that we're actively seeing? Are more drivers signing up to get back into the gig economy wherever jurisdictionally possible? And who is winning out the majority of those drivers from your perspective and your analysis?
BRAD ERICKSON: Yeah. You know, I think as-- you know, coming out of COVID and, obviously, we had a unique situation with federal and state-level stimulus that was, sort of, impeding people re-entering the workforce in many cases, where there had been a lot of safe services job losses, I think now, in light of inflation and some of the other macro headwinds, you are seeing a bigger tailwind to those drivers coming back.
And you've seen that for the last several quarters, and the companies have been vocal in talking about it. I think, back to that structural disadvantage piece, though, we do think Uber has been generally winning that battle. And again, part of that relates to they can pay drivers more per hour because, for example, they're pricing higher and they're getting better utilization.
And so if you're Lyft-- and this is what we called out in our note-- the risk here is that you have to, sort of, double down and dip back into paying more incentives, and that comes straight out of margin, as we've seen. We've had a few quarters of disappointing guidance related to this over the last, I guess, three or four quarters for Lyft, and we're flagging that as a potential ongoing risk here-- again, as a function of that structural disadvantage I keep talking about.
JULIE HYMAN: Yep. Poor Lyft, maybe. All right, Brad. Thanks so much. Brad Erickson, RBC Capital Markets Internet Analyst.
BRAD ERICKSON: Can't be more optimistic.
JULIE HYMAN: All good. It's great to have that perspective. We appreciate it.
