Ride-hailing service Lyft (LYFT) continues to see its stock soar Wednesday — cooling after a colossal rise in Tuesday's after-hours trading — while reporting positive forward guidance. Uber (UBER), a major competitor in the space, topped its fourth-quarter earnings estimates, citing significant increases in year-over-year bookings.
Gig economy workers — including those from DoorDash (DASH) — have staged a strike, seeking fairer pay and treatment by employers. Manhattan Venture Partners Head of Research Santosh Rao and Citizens JMP Securities Head Mark Lehmann join Yahoo Finance to talk about these events that may create further headwinds for companies powered by the gig economy.
"These services have become an intrinsic part of the transportation fabric of all the cities, I think everybody knows that," Rao comments. "I think they will settle at some point. They need to maybe compromise, the costs will get pushed down, the insurance costs and all of that will come down... I think net-net I feel they will eat the cost, they will pass it down to the users, but they can manage it."
For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.
Editor's note: This article was written by Luke Carberry Mogan.
Video Transcript
AKIKO FUJITA: Santosh, there are still headwinds here in this space, one being higher insurance costs, which was flagged by both of these companies, you look at Lyft and Uber. But also today, we've got a nationwide strike among Uber and Lyft drivers as well as DoorDash delivery drivers. The concerns being about safety as well as wages. How significant is that headwind going to be for these gig economy companies moving forward?
SANTOSH RAO: Yeah, I think this headwind has been there for a while. It comes and goes in different forms. I mean, the companies have to pay attention to that overall, I think they will-- and they will manage that. I think that's an important part.
We need this service. These services have become an intrinsic part of the transportation fabric of all the cities. So I think everybody knows that, so there is a need for that. So I think they will settle at some point.
They need to maybe compromise. The costs will get pushed down. The insurance costs and all that will come down. You see the Uber rides and Lyft rides are slightly higher, not as cheap as before.
The value proposition is not as compelling as before, but it's still the best option compared to the taxis out there. So I think net-net, I feel they will eat the cost. They will pass it down to the users, but they can manage it.
I mean the thing is these strikes have been around. And I was listening to one former executive of one of these ride-sharing companies and he said while he was there, there were strikes every other time in some form or the other and they always negotiated and came to a settlement. So I think I expect that to happen again because it's too important for both sides to continue and do well.
AKIKO FUJITA: Mark, do you agree with that, that this is kind of a manageable risk that will be a constant in terms of the pushback coming from the delivery drivers, at least in the case of DoorDash with the higher wages, as well as more benefits?
MARK LEHMANN: You know, I do. It's one of those situations where both sides have leverage. And that sounds oxymoronic, but I think they do. And I think there will be a solution.
And we've been saying it here for some time here at Citizens about Meta and some of the other companies that have been held in front of Congress, et cetera, that the specter of regulation and the specter of these fears have been a lot worse than the actual. And every time Mark Zuckerberg got in front of Congress, stocks got worried. But instantaneously, those stocks started to lift again afterwards.
Because let's be clear, Congress has great appetite for showmanship and showing that they're on the side of regulation and they have no appetite to actually do it. And I think there's somewhat of a parallel here, that you're going to have people having these one-day strikes. And I'm all in favor of safety, security, and people getting a fair wage, but there's plenty of room here. And I think the healthy margins that Dara and others are talking about for Uber at the analyst day to day are going to show that there's plenty of upside.
And when you remember, Uber hit an all-time high today. DoorDash is far, far away from that all-time high in the hysteria of 2021. So there's room to grow here and if they get that healthy EBITDA margins with some expense pressures from insurance and other and safety and security.
And let's talk about one other thing that's not even in the mix here, the threat of autonomous vehicles. That was clouding these stocks for so long. We don't even talk about it anymore, OK?
So yeah, we'll have some driverless vehicles on the road and I'm sure there'll be some pushes to that, but we haven't even brought that up in the conversation today. Why? Because the threat of that was far worse than the actual. And I think that's a parallel with what you talk about regulation and insurance pricing.
