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Forget Lyft Slump: Play Ridesharing Earnings With These ETFs

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It’s not even a year since Lyft (LYFT - Free Report) and Uber (UBER - Free Report) hit the financial markets. Lyft went public at the end of last March, while Uber hit the markets in May. Notably, the Lyft IPO had a dazzling market debut, only to nosedive soon after. And Uber shares also dropped 6.7% at the start from its IPO price of $45. It is to be noted that at the time of going public, both were loss-making companies.

Since then, the duo had a terrible 2019 with shares on a freefall since mid-July. However, shares have risen 11.2% and 33.1% this year, respectively. This puts the spotlight on the earnings releases of these ridesharing giants as only that can decide the future course of the stocks. The sooner the duo records profit, the better should be their stock performances (read: Uber Crashes: Time to Buy the Dip With IPO ETFs?).

Inside the Earnings Releases

On Feb 11, Lyft reported fourth-quarter 2019 results, after market close. The company incurred a loss (excluding 78 cents from non-recurring items) of 41 cents per share, narrower than the Zacks Consensus Estimate of a loss of 57 cents. Results were aided by solid revenue growth of 51.9% on a year-over-year basis to $1.017 billion, courtesy of robust rise in Active Riders and Revenue per Active Rider. The top line also surpassed the Zacks Consensus Estimate of $984.5 million. Management raised its guidance for 2020.

Notably, this was the fourth earnings report for Lyft since it went public. Lyft has delivered a positive earnings surprise for three quarters in a row. Still, shares slumped 10.2% on Feb 12 due to its conservative approach toward earning profits as compared with rival Uber. Lyft maintains its stance to earn profits on an adjusted EBITDA basis in the fourth quarter of 2021, while Uber technologies hopes to generated profits by the fourth quarter of 2020. Previously, Uber expected to achieve EBITDA profit for 2021.

On Feb 6, Uber reported earnings after market close. The company incurred a loss of 64 cents per share (or net loss of $1.1 billion, up 24% year over year) in the fourth quarter of 2019, narrower than the Zacks Consensus Estimate of a loss of 68 cents. Moreover, the amount of loss decreased year over year. However, total revenues of $4,069 million missed the Zacks Consensus Estimate of $4,099.8 million but rose 37% year over year. Sharesrallied more than 5% during after-hour trading on that day. The stock has added 3.5% in the past five days. Notably, the stock has beaten the Zacks Consensus Estimate in three of the last four quarters.

ETFs vs Stocks: Which Should You Pick?

Investors may be disappointed with Lyft’s slower approach but Uber and Lyft’s steady improvement can’t be ignored. Sooner or later, investment in these ridesharing companies should pay off. Both the stocks currently have a Zacks Rank #2 (Buy).

But investors, who are having doubts about Lyft, may give a thought to the fund, Renaissance IPO ETF (IPO - Free Report) . The fund is up 9.9% this year. The fund is 12.35% exposed to Uber and 3.9% to Lyft (read: After a Stellar 2019, What Awaits Global IPO ETFs in 2020?).

The ETF tracks the rules-based Renaissance IPO Index, which is a portfolio of new U.S.-listed IPOs of companies whose unseasoned equities are under-represented in core U.S. equity indices. Meanwhile, companies that have been public for two years are removed at the next quarterly review.

Plus, SoFi Gig Economy ETF (GIGE - Free Report) , Amplify Online Retail ETF (IBUY - Free Report) and SPDR S&P Transportation ETF (XTN - Free Report) have weights in Lyft (read: Want to Tap a Gig Economy? Play the New SoFi ETF GIGE).

Janus Henderson Small/Mid Cap Growth Alpha ETF (JSMD - Free Report) has 4% weight in Uber. Global X Millennials Thematic ETF (MILN - Free Report) also puts 3.7% weight in Uber.

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