Gig economy stocks Lyft (NASDAQ:LYFT), Uber (NYSE:UBER) and DoorDash (NYSE:DASH) have been among the most high-profile initial public offerings, or IPOs, on Wall Street in recent years. But in the beginning, they weren’t all treated the same. Lyft and Uber famously got off to horrendous starts in the market, while DoorDash shares skyrocketed after its IPO.
Does this disparity still hold?
Analysts are expecting the economy to return to normalcy throughout 2021. Year-to-date, all three gig economy stocks are at least above water. DASH stock is up 2%, LYFT stock is up 28% and UBER stock is up 9%. All three gig economy stocks may have bright long-term futures. But they may not all make great investments in 2021.
Here are those gig economy stocks I mentioned above, ranked from best to worst.
In an uncertain environment, I believe UBER stock is the most defensive investment of the three. Following its $2.65 billion Postmates buyout last year, Uber now has 26% share of the U.S. food delivery market. It also has about 68% share of the U.S. ride-hailing market.
There’s no question 2020 was a brutal year for Uber. The company reported a net loss of $6.7 billion. In the fourth quarter, Uber reported $6.79 billion in mobility gross bookings, down 50% from a year ago. However, the food delivery business has carried the company throughout the pandemic. Delivery gross bookings were $10 billion in the quarter, up 130% from a year ago.
The food delivery business has thrived during the pandemic, while the ride-hailing business has been crushed. In 2021, an economic recovery should completely flip the table. The ride-hailing business will have some extremely easy comps. As soon as it is safe, there will be tremendous pent up demand for calling an Uber to go out and do … well … ANYTHING at this point.
At the same time, if heaven forbid the virus mutates or the vaccines aren’t as effective as anticipated, Uber has its delivery business to fall back on once again. UBER stock is the best of both gig economy worlds. It has ride-hailing as a recovery play and delivery in the event of a prolonged pandemic. It’s the best gig economy stock to buy today.
Like Uber, Lyft’s ride-hailing business was completely crushed in 2020. Unlike Uber, Lyft has no delivery business to fall back on. Lyft is a distant second to Uber in the U.S. mobility space with about 32% market share.
Lyft reported a $1.75 billion net loss in 2020. Revenue for the year was $2.36 billion, down 34.6% from 2019. However, the stock has surged so far in 2021 as investors anticipate a rebound in the mobility business. Lyft is the more aggressive pure-play on a return to normal life in 2021. If Americans start going out again in droves this summer, Lyft won’t have pandemic-level food delivery comps dragging down its overall numbers. Therefore, Lyft likely has the most upside of the three gig economic stocks in the near-term.
Valuations don’t tend to matter so much with these types of story stocks. However, LYFT stock also has a reasonable price-to-sales ratio of 8.5.
Finally, LYFT stock also has long-term upside related to the exciting field of autonomous vehicles. Lyft and partner Motional expect to launch self-driving vehicles in multiple U.S. cities starting in 2023.
It’s extremely difficult for me to find a reason to buy DASH stock over Uber or Lyft at this point. In the unlikely event the pandemic worsens, DoorDash is a pure-play on delivery. The company has 56% share of the U.S. food delivery market.
However, the economy appears to be on the path back to normal. In my mind, there is literally no better environment in which to operate for a food delivery business than a pandemic. DoorDash certainly won’t match its 2020 growth numbers in 2021. It likely won’t match them ever again.
The stock went public at $102 per share in December. Since its IPO, the stock is up more than 39%.
Uber and Lyft both went through the first-year growing pains of a high-profile tech IPO. Expectations are through the roof. That new car smell fades, and investors will move on to Robinhood or the next mega IPO.
DASH stock is staring down the barrel of impossible 2021 comps. If you’re looking for the best of the gig economy stocks, DoorDash is not the play.
On the date of publication, Wayne Duggan did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Wayne Duggan has been a U.S. News & World Report Investing contributor since 2016 and is a staff writer at Benzinga, where he has written more than 7,000 articles. He is the author of the book “Beating Wall Street With Common Sense,” which focuses on investing psychology and practical strategies to outperform the stock market.