Even before the spread of the novel coronavirus shook the global economy, long-term Lyft (NASDAQ:LYFT) stockholders were facing major challenges. This is evidenced by the slow but steady decline in the share price since the firm’s 2019 initial public offering.
The ride-hailing industry was red-hot and, for eager investors, top-of-mind at the outset of last year. Riding on the coattails of the bigger and more famous Uber Technologies (NYSE:UBER), whose stock price did briefly pop, Lyft opened its shares to public trading amid much fanfare.
That fanfare was short-lived, however. Lyft stock promptly cratered and hasn’t recovered since. And as we might expect, the coronavirus crisis battered the share price even further.
The question, then, remains as to whether a cheaper share price presents a prime buying opportunity or just a ride to nowhere.
The Safety Issue Arises
InvestorPlace contributor Chris Markoch authored an excellent, recent article on Lyft stock which I highly recommend. In it, he raises an important issue that few other market experts have even bothered to mention.
Specifically, Markoch refers to the problem of safety surrounding the ride-sharing experience. This is something that impacts not only the riders, but also the Lyft workers who provide those rides.
The onset of the coronavirus has forced the populace to focus on hygiene and safety more than they’ve had to in a very long time. And every time someone enters a vehicle with a complete stranger, he or she is reminded of these lingering safety issues.
Between Lyft and Uber, it could be argued that the latter is being more proactive in helping riders feel safe. Uber is requiring its drivers, before starting work, to take a photo of themselves in which they’re wearing a mask. As of this writing, Lyft doesn’t appear to have such a requirement for the company’s drivers.
In response to this, a spokesperson from Lyft countered that the company has “made drivers aware that it’s required by law to wear a face covering in certain regions.” But today’s safety-conscious ride-share patron won’t trust drivers to always follow the letter of the law.
Plus, Uber is imposing other safety-focused restrictions. For example, Uber asserts that the company will mandate that passengers can only sit in the back of vehicles. That is a recommendation from the CDC.
In addition, Uber stated that it will only allow up to three passengers in each vehicle. Lyft ought to follow Uber’s lead in imposing strict safety rules. That would provide a greater sense of safety and security for Lyft’s passengers.
A Big Threat from an E-commerce Behemoth
When Amazon (NASDAQ:AMZN) threatens to steal a company’s market share, the shareholders of the company being threatened need to sit up and pay attention.
It looks like Amazon might be getting in on the ride-sharing action. If Amazon deploys a massive fleet of self-driving taxis, that could spell trouble for Lyft stock.
In late May, Amazon announced that it’s in advanced talks to acquire Zoox. Founded in 2014, Zoox develops autonomous-vehicle technology.
Zoox is currently working to develop software and hardware to potentially create robotic taxis that could be summoned via a smartphone. Amazon has more than enough capital to buy Zoox. At this point, it might just be a matter of ironing out the details.
Besides, Amazon might want to buy out Zoox to enhance the efficiency of its delivery network. Either way, the fact that Amazon’s got its eye on autonomous-vehicle technology doesn’t bode well for the already struggling Lyft.
The Takeaway on Lyft Stock
Again, Markoch’s article brings up a great point about riders’ understandable safety-related concerns. Meanwhile, the Amazon threat isn’t immediate but nonetheless looms large over Lyft. So if you must take a ride with Lyft shares, keep it brief and get off at the next available stop.
As of this writing, David Moadel did not hold a position in any of the aforementioned securities.
