Like Facebook (NASDAQ:FB), Uber went public to much fanfare and was creamed from its first day of trading; The price action is eerily similar. That said, Facebook went on to rally more than ten-fold from its post-IPO lows, mostly because it was insanely profitable.
That’s where the similarities end, with Uber and Lyft stock both losing plenty of money. If the companies can start making meaningful progress toward negating those losses, investors may look to these two names as a go-to investment in 2020. Overall, though, Uber and Lyft are very much “prove-it” stocks and deserve very little benefit of the doubt.
Also, as it stands, Uber looks better than Lyft.
Trading Lyft Stock
Above is a look at Lyft stock price. Shares are still down roughly 45% from the 12-month highs, but are trying to carve out a bottom. Buyers were clearly willing to step up in the $37 to $38 area, which is good. But, the stock’s latest developments aren’t so positive.
After initially pushing through its major moving averages, these metrics proved too powerful for Lyft stock price. The 20-day, 50-day and 100-day moving averages are all clumped together between $45.10 and $45.50, and all three are trending lower. They are all also acting as resistance, as bulls tested but failed to reclaim them in four consecutive days of recent trading.
Those tests came right after Lyft stock broke below uptrend support — the above blue line. Below its major moving averages and below trend does not bode well for investors. If the stock takes out the December low of $42.78, it puts the $40.50 level on the table. Below that, and the $37 to $38 area can be tested.
For bulls to resume control, Lyft stock needs to reclaim its major moving averages — and preferably, break out over $48.
Trading Uber Stock
Uber stock isn’t out of the woods here either, but the charts do look better. Shares are holding up over the 20-day and 50-day moving averages, and are trying to reclaim and remain above its 100-day moving average. It’s also reclaiming downtrend resistance — the above purple line.
It’s a name we flagged the other day on Twitter (NYSE:TWTR), as it continues to look more and more constructive. Further, Uber stock is holding up over uptrend support — the above blue line — and that’s a big technical difference compared to Lyft stock.
If Uber can push through the $31 area, could it rally 7% to 10%, up to the $33 to $34 area? It seems realistic, given the technical layout. More importantly, though, if it’s able to clear resistance and move higher, bulls will have points of reference for support. Meaning that, Uber may find prior resistance to be future support.
If this development occurs, it will show that bulls are in control. Lyft can get here too, but it needs more work than Uber stock at the moment.
Uber vs. Lyft
The biggest problem for Uber and Lyft stock at this point? The fundamentals aren’t yet able to bail out investors.
Circling back to our earlier comparison between Facebook and Uber, Facebook stock was a total disaster for the first few months of its public life. However, it was eventually able to turn things around because of shining fundamentals.
Uber and Lyft don’t have that advantage, so they need to rely much more on the technicals to drive momentum. If they can get the fundamentals aligned faster than expected, perhaps it could act as another positive catalyst. For now, though, that’s not the case.
Lyft generates trailing gross margins of 37.6%, according to SeekingAlpha. Worse, it’s not yet able to turn an operating profit — and thus, has negative operating margins. Lastly, here’s a mixed situation: free cash flow. On the down side, the company does not generate positive free cash flow. On the plus side, Lyft’s free cash flow deficit has improved in each of the last three years.
Given the fundamentals, it should come as little surprise that Uber is ahead of Lyft stock here, too. It has better gross margins and a stronger balance sheet. Like Lyft, it has negative free cash flow, but is reducing the deficit annually. Some analysts have argued that it will be easier for Uber to turn positive than Lyft as well.
Working in Lyft’s favor, at least for the short term, is its smaller size. While being larger gives Uber the advantage of scale, Lyft’s smaller size allows it to be more nimble. In any regard, the fundamentals are a “wait-and-see” situation, which means we have to rely on the technicals. And, as of now, that means Uber looks better than Lyft stock.