A brisk rally in the shares of Uber Technologies Inc. and Lyft Inc. has put the ride-hailing companies on pace for their biggest weekly gains since they went public in 2019, bringing much-needed relief for investors after a dire year.
(Bloomberg) — A brisk rally in the shares of Uber Technologies Inc.
and Lyft Inc. has put the ride-hailing companies on pace for their biggest weekly gains since they went public in 2019, bringing much-needed relief for investors after a dire year.
Uber shares are up 35% this week, while Lyft has advanced 41%.
Both companies impressed investors this week with strong quarterly results that showed they’re set to benefit from robust demand as people slowly return to pre-pandemic travel and commute routines.
“Uber and Lyft’s success speaks to the reopening process that is happening this summer with pent-up demand for getting out and about,” said Arthur Hogan, chief market strategist at B.
Riley Wealth.
A broader recovery in the US markets, especially in hard-hit technology and growth stocks, is also driving some of the gains. The Nasdaq Composite Index is poised to gain for a third straight week, something it hasn’t done in four months.
Granted, it slumped Friday as stronger-than-forecast US labor data boosted bets on aggressive Federal Reserve interest-rate hikes to combat soaring inflation.
The two companies are riding the latest rebound in risk appetite, after a steep erosion in market valuation made their shares look like a bargain relative to pre-pandemic levels.
The week’s advance pared this year’s loss in Uber shares to 24%, while Lyft is still down 54%.
“There is a bit of a bounce back happening as investors get more comfortable with taking on risk, but these companies are proving the risk associated with their business has moderated as consumer and driver demand pick up,” said Ally Financial’s Lindsey Bell.
The big caveat is that the businesses are unprofitable and market sentiment continues to be cautious.
“Neither Uber nor Lyft makes money yet and it’s going to be a long time before they make a lot of money,” said Matt Maley, chief market strategist at Miller Tabak & Co.
“Therefore, I question whether these are stocks that people should be chasing.”
If their latest quarterly results are a reflection of a bottoming of the negative consumer sentiment seen in recent months, Maley recommends going after “the consumer stocks that actually make money.”
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