Lyft's tumbling stock has quickly gone from a big problem to a bigger one.
If losing billions in market cap wasn't enough, the ridehailing company's rocky foray into the public markets has been followed by multiple class-action lawsuits from investors—the most recent filed Friday by Boston-based law firm Block & Leviton.
One of the primary allegations is that Lyft misrepresented its market share in the buildup to its IPO in late March.
Lyft claimed in its S-1 filing that it owns 39% of the US ridehailing market, as of December 2018, up from 22% in December 2016. The data came from Rakuten Intelligence—a subsidiary of Lyft's biggest pre-IPO shareholder, Rakuten—and the extent of that growth came into question when rival Uber later claimed in its own IPO filing to have a roughly 65% share of the US & Canada ridehailing market.
Two third-party research providers that analyze credit card purchases, Second Measure and Earnest Research, posit that Lyft's domestic market share is probably around 30%. In a note to clients, Guggenheim analysts reportedly estimated that Uber's market share should be about 55% larger than Lyft's when comparing metrics like bookings, trips and revenue.
So, when it comes to market share, is Lyft nipping at Uber's heels or farther away than it disclosed?
"The truth is probably somewhere in the middle," said PitchBook Emerging Tech analyst Asad Hussain, who covered the industry in depth in his recent mobility tech report. "Exact numbers aren't that important. The focal point for investors should be that Lyft is gaining share domestically over Uber."
When comparing Uber and Lyft, what's more important than ridehailing market share, according to Hussain, is total addressable market.
Uber spent a significant portion of its S-1 filing talking about TAM, stressing that its market is much different from Lyft's. Unlike Lyft, which is focused on the US ridehailing space (plus dockless bike and scooter rentals), Uber is a global platform that also has significant operations in food delivery and freight—two massive markets.
Uber pegs the market for Uber Eats at $795 billion, the amount people spent on restaurant meals from delivery, takeout and drive-through worldwide in 2017, per Euromonitor International. "The home delivery market, which accounts for $161 billion of the opportunity, has grown 77% year-over-year since 2013, significantly faster than the growth rate of the consumer food service market, which grew 5% over the same period," the company added in its S-1.
As for the freight business, Uber puts that market at $700 billion in the US—the amount business spent on US trucking in 2017, according to the American Trucking Associations—and up to $3.8 trillion on a global basis. From the S-1: "We believe the business logistics market is moving towards an on-demand logistics model, as evidenced by the brokerage segment growing at a compound annual growth rate of over 11% from 1995 to 2017. We believe that we penetrated less than 0.1% of this $700 billion market given our $359 million of Uber Freight Gross Bookings for the year ended December 31, 2018."
In March, the company announced the expansion of Uber Freight into Europe, which has an estimated freight market of $600 billion. All said, it's enough to show that an Uber vs. Lyft comparison isn't as clean as their reputations as rivals might indicate.
"Clearly, this is a huge market," Hussain said, "and over the long term, Uber could be the better positioned of the two as it represents a platform play into the global mobility-as-a-service market."
Shares for both Uber (-10%) and Lyft (-22%) are in the red since their IPOs, a sign both have much to prove as it relates to their performance—and the communication around that performance. A clear understanding of the key commonalities and, perhaps more important, the core differences between the companies' offerings and markets will be crucial to evenhanded benchmarking amid lawsuits, earnings reports and whatever else is in store under the brighter lights of Wall Street.
Featured image courtesy of Uber.
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