Despite Lyft's latest earnings, analysts predict Uber's dominance will continue

Despite Lyft's poor guidance, Wall Street analysts say the company has no excuse.

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Traders weighed the ridesharing company's weaker-than-expected earnings forecast in Friday's premarket trading, which dropped more than 30%. Other than that, the firm beat revenue expectations.

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According to Trade Algo, the ridesharing company expects to make $975 million in revenue in the fiscal first quarter of 2023, down from analysts' consensus estimates of $1.09 billion. A first-quarter adjusted EBITDA of $5 million to $15 million was also forecast by Lyft.

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 Wall Street observers found that explanation insufficient. Even as Lyft appears to be falling behind, Uber may be better positioned to benefit from a broader recovery in the ridesharing industry.

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Despite a 74% drop in 2022, Lyft shares jumped over 47% as of Thursday's close. The share price of Uber rebounded 45% after falling 41% last year. The share price of Uber fell by more than 3% in premarket trading on Friday.

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Doug Anmuth, an analyst at JPMorgan, downgraded Lyft shares to neutral from overweight and halved his price target. From Thursday's closing price, his $15 price target suggests shares should drop another 7%.

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In our positive thesis on Lyft, we combined post-pandemic recovery with cost rationalization to accelerate the shift to profit. While ridesharing is now approaching full recovery in the US, Lyft is not,” according to Anmuth.

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The increasing supply of drivers has normalized the market--following a few tight years--and prices are easing. Anmuth said that these dynamics, coupled with increased insurance costs, caught Lyft by surprise and have negatively affected its business.

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According to Truist analyst Youssef Squali, Lyft is falling behind Uber in the marketplace due to lower growth and margins. The price target for Squali was also lowered to $14 from $40. From Thursday's close, shares can fall another 13%.

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Lyft lowered its base pricing in order to compete better with Uber in January, which impacted revenue growth. It appears that Lyft (Buy) has a more structural issue than Uber (Buy) when it comes to profitability in 1Q23, according to Trade Algo analysts.