Food delivery top dog DoorDash (NASDAQ:DASH) and ride-hailing lightweight Lyft (NASDAQ:LYFT) need to pick their game up if they’re to nip at the heels of Uber (NASDAQ:UBER). Undoubtedly, UBER stock has been incredibly hot over the past two years, skyrocketing more than 197%, even with the latest 17% correction considered. Meanwhile, DASH and LYFT shares are nowhere close to their respective all-time highs.
That said, newfound momentum in DASH and LYFT, alongside a disappointing post-earnings plunge from Uber, could set the stage for a more competitive battle, moving forward. In any case, both firms are hungry to take some serious market share away from the $140 billion juggernaut that is Uber. Whether the two Uber rivals decide to team up or merge remains the billion-dollar question.
Back in March, an analyst at RBC Securities analysts suggested that DoorDash and Lyft merge to give Uber a bigger run for its money. More recently, Pierre Ferragu of New Street Research also highlighted potential synergies from a DoorDash-Lyft merger. Indeed, the calls for the big move seem to be getting louder from the analyst community.
Many may wonder why it’s taking so long for the two Uber rivals to join forces. Personally, I think a merger makes the most sense. However, I’d also view a partnership as a promising first step toward an eventual combination of the two Uber rivals. This would turn them into a force that may just be able to keep up stride for stride with the mobility top dog.
But whether there’s a deal or not, I find DoorDash and Lyft to be nothing short of intriguing for some of the value-conscious investors out there who may have missed the magnificent multi-year run in UBER stock.
Not only can the two rivals move in on Uber’s share if they play their cards right, but I think the potential for partnerships could seriously even the playing field and trickle in some of the economic profits Uber has been enjoying over to its two much smaller rivals. For now, I’m bullish on both DASH and LYFT as they keep their foot steadily on the gas.
DoorDash (NASDAQ:DASH)
DoorDash has shown the world it’s more than capable of posting impressive growth all on its own, with shares surging around 225% from their 2022 trough to their eventual April 2024 peak. Though DASH stock has come down a bit, now off 19% from its recent peak, I continue to view DoorDash as more than able to make a bigger dash in the field of food delivery.
For the latest quarter, DoorDash reported some satisfactory first-quarter numbers, but guidance for the next quarter fell flat. Investors seem to be skipping right past some quarterly bright spots (delivery orders up 21% year-over-year) straight to the forward-looking guide. For its coming second quarter, gross order value (GOV) and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) are to see flat growth quarter-over-quarter.
In light of uncertain macro conditions, I’d argue management is wiser to err on the side of caution. As growth pulls the brakes slightly while profitability continues to be out of sight, investors may fear the worst: that food delivery isn’t so great of a business after all.
Only time will tell if a tough second quarter is the start of more troubles. Either way, now seems like a perfect time to team up with Lyft. Uber shows us that food delivery and mobility are a match made in heaven. The bundling opportunities offered by a mobility and food delivery subscription seem perfect for today’s inflationary times, where consumers want convenience and value.
What Is the Price Target for DASH Stock?
DASH stock is a Moderate Buy, according to analysts, with 19 Buys and 10 Holds assigned in the past three months. The average DASH stock price target of $139 implies 19.3% upside potential.
Lyft (NASDAQ:LYFT)
Lyft stock has quietly surged more than 104% over the past year on the back of a few stellar quarters. The impressive earnings-beat streak continued last week, with the stock spiking following the release of some nice first-quarter results. Though LYFT stock has given back a chunk of the immediate post-earnings gains, I continue to view Lyft as a top contender that’s going to explore all roads in a bid to catch up with Uber. There’s still a long way to go, but Q1 was definitely a large step in a journey of a thousand miles.
For Q1, revenue popped 28% to $1.3 billion, with a 23% year-over-year pop in rides. As Lyft expands its services in new North American markets, many of which have just had Uber for the past few years, the competitive landscape in such localities could begin to even out.
As Lyft increases its reach, recent growth could stay impressive. However, suppose Lyft wanted to make a dent in Uber’s business in the medium term. In that case, I’d argue it’d have to team up with a food delivery firm to offer a subscription that matches Uber One, which provides discounts on mobility and food delivery.
Back in 2020, Lyft offered Grubhub+, a food delivery subscription, as a perk. However, I believe the move was more of a promo than a precursor to an Uber One-like subscription. Nevertheless, at 1.44 times price-to-sales (P/S), miles below Uber’s 3.7 times P/S, I’d argue that the ride-hailing crown is Uber’s to lose as Lyft keeps lifting its sales every quarter.
What Is the Price Target for LYFT Stock?
LYFT stock is a Hold, according to analysts, with five Buys, 22 Holds, and one Sell assigned in the past three months. The average LYFT stock price target of $18.33 implies 7.3% upside potential.
The Takeaway
Only time will tell if DoorDash and Lyft will unite to take on Uber. Given industry dynamics, the future seems to point toward a bit more consolidation.
Analysts seem spot on in that there’s ample value (in the form of synergies) and growth potential that could be unlocked as the two transportation innovators join forces. Either way, I’d much rather bet on LYFT or DASH stock than UBER at today’s multiples.
