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MarketWatch First Take: Uber tried to outrun the fears Lyft created, but its stock is getting smacked anyway

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Uber Technologies pulled out all the stops on Wednesday to distance itself from the issues that have pulled down rival Lyft Inc. and convince investors it’s the long-term leader in mobility, but its shares fell anyway.

On Tuesday, ride hailing app company Lyft
LYFT,
-33.21%

reported first-quarter earnings that were better-than-expected, but said it was going to increase its spending to attract more drivers. Ridership in the quarter, and revenue guidance for the second quarter were a bit short of Wall Street’s expectations, while its forecast for adjusted earnings was much lower, fueling a 31% drop in its shares on Wednesday. Wedbush Securities analysts wrote a note on the quarter, entitled: “Spending Like an 80’s Rock Star Won’t Fly With Investors.”

The stock fell more than 25% during Lyft’s late Tuesday earnings call, pulling Uber lower with it. Uber said it would move up the release of its earnings to before the U.S. stock market opened Wednesday, instead of after the market close, which is its usual practice. It was pretty clear it wanted to show it had good news, and avert a similar disaster in its own stock.

In its call Wednesday morning, Uber
UBER,
-9.95%

dispensed with the standard recap of the quarter by Chief Executive Dara Khosrowshahi and Chief Financial Officer Nelson Chai. After a very brief introduction, in which Khosrowshahi noted that “Q1 results resoundingly affirm that we’re on a strong path emerging out of the pandemic,” Uber went straight to Q&A.

Uber reported a whopping $6 billion loss, the bulk of which was due to its investments in other companies, such as Grab Holdings Ltd.
GRAB,
-5.08%
.
Didi Global Inc.
DIDI,
-4.98%

and Aurora Innovation Inc.
AURA,
-1.24%
,
and it sought to reassure investors that it is no longer having any issues attracting drivers. It also emphasized many of its growth expansion projects, such as grocery delivery and working with taxi companies in New York and San Francisco.

“You heard I think last night one of our competitors in the US having challenges or at least looking to lean into driver supply,” Khosrowshahi said. “Our active drivers in the US and Canada are up 70% on a year-on-year basis in April.” He also pointed out that new drivers were up 121% in April. “And it’s because we’re bringing new drivers on, not as Uber Rides, not as Uber eats, but as Uber as a platform and to earn in any way shape or form on the platform.”

In November, Uber launched Uber One in the U.S., a membership program that takes a page from Amazon Prime
AMZN,
-3.37%
,
and gives guaranteed discounts and exclusive offers for its rides, restaurant delivery service and grocery delivery, for a monthly fee of $10 or $100 a year. Khosrowshahi noted that members spend 2.7 times more than regular Uber users.

Uber is investing in a big way in its business. Its total costs and expenses nearly doubled in the March quarter to $7.3 billion from $4.4 billion in the year-ago quarter. But its loss from operations declined to $482 million, down from $1.5 billion a year ago, as its revenue soared 136% to $6.9 billion. Uber noted that revenue outpaced bookings because of an acquisition in the U.K.

“These results are particularly impressive given the growing list of macro and micro concerns weighing on all Internet stocks,” said Rohit Kulkarni, an analyst at MKM Partners, in a brief note to clients.

When the market opened on Wednesday, however Uber’s shares fell 11%, toward their lowest close since April of 2020 as investors appeared to be concerned about the big spending at both companies and macroeconomic factors. The Dow Jones Industrial Average
DJIA,
+0.33%

was up very slightly, while the S&P 500
SPX,
-0.47%

was down 0.2%.

One of those concerns is the ongoing impact of inflation and oil prices on a business that is dependent upon consumer spending. Uber said that its Rides business had fully recovered to pre-pandemic levels and that food delivery has remained surprisingly resilient as the world has reopened. Investors, though, are likely jittery about the spending, amid an ever-changing economic environment.

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