On Wednesday, New Street Research analyst Pierre Ferragu stated that Lyft could merge with DoorDash as the synergy between the mobility and delivery businesses are “undisputable.”
The analyst pointed out in his research note to clients that such a merger could be “beneficial, without materially affecting Uber, who would trade a stronger competitor for a more concentrated market, and retain a strong #1 position in Mobility in the U.S.”
Ferragu is of the opinion that the ridesharing and food delivery businesses are complementary to each other, and the combination of both services would offer “drivers increasing utilization and as a result better earnings.”
In this scenario, let us compare these two businesses, DoorDash and Lyft, and see how they stack up against each other using the TipRanks stock comparison tool. We will also look at what other Wall Street analysts, besides Ferragu, are saying about these stocks.
DoorDash (NYSE: DASH)
Shares of DoorDash have rallied 33.4% in the past month, even as the on-demand delivery service platform delivered mixed Q4 results. Its key business is Marketplace, which offers customer acquisition, delivery, payment processing, and customer analytics to merchants.
DoorDash’s revenues in the fourth quarter soared 34% year-over-year to $1.3 billion, exceeding analysts’ estimates of $1.28 billion. The rise in revenues was driven by a 35% increase in Total Orders to $369 million and a 36% jump in Marketplace Gross Order Value (GOV) to $11.2 billion.
However, DASH’s losses widened quarter-over-quarter to $155 million in Q4 from $101 million in Q3. Quarterly diluted net loss stood at $0.45 per share, much worse than Street estimates of $0.27 per share.
In Q4, however, DASH’s Monthly Active Users (MAUs) and DashPass continued to trend higher, with MAUs growing 22% year-over-year to over 25 million while its DoorPass members surpassed 10 million.
Needham analyst Bernie McTernan pointed out that there is a rising percentage of MAUs that is coming from non-restaurant categories. Elaborating further, the analyst stated that in Q4, 14% of MAUs came from non-restaurant categories, up from 12% in Q3.
McTernan believes that if this use case continues to expand, he expects “DASH to be able to achieve efficiencies from order density, grow market share and generate material advertising revenue.”
The analyst, while reiterating a bullish rating on the stock with a Buy rating, however, lowered the price target from $270 to $160, implying an upside potential of 50% at current levels.
McTernan is of the view that “subscription and multiple vertical offerings are crucial for the long-term economics of the platform, as lower profits per order from a subscriber is more than offset by lower CAC [customer acquisition costs] and higher LTV [long term value].”
Other analysts on the Street are cautiously optimistic about the stock, with a Moderate Buy consensus rating based on nine Buys and seven Holds. The average DASH stock forecast is $164.21, implying an upside potential of 54% from current levels.
Lyft (NASDAQ: LYFT)
Shares of Lyft have not fared well this year as the stock has tanked 21% year-to-date, even as the ridesharing company delivered solid Q4 results. The company achieved its first year of adjusted EBITDA profit of $92.9 million in FY21 versus an adjusted EBITDA loss of $755.2 million in FY20.
Lyft’s other financial metrics also reached new highs in Q4, including Revenue per Active Rider, Contribution Margin driven by the reopening of the economy and momentum in demand for ride-hailing services.
Will the company retain this momentum in Q1? Lyft had cautioned on its Q4 earnings call that the Omicron variant could impact its ridesharing volumes and would drag them down in Q1. As a result, the company anticipates revenues to decline quarter-over-quarter by 12% to 18% in Q1 to range between $800 million and $850 million.
Last month, while Needham analyst Bernie McTernan’s mobility checks regarding Lyft were positive, the analyst remained sidelined on the stock with a Hold rating. Giving his rationale for the rating, the analyst pointed out that Lyft needs to show “accelerating growth” either from rising usage, maintaining increased prices, gain in market share, or “the staying power of new use cases.”
Moreover, McTernan thinks that gaining market share would be the “toughest lever to pull as its main competitor [most likely, Uber] has overhauled its platform and offers consumers a much more compelling value proposition with delivery and mobility vs. strictly delivery.”
The analyst’s most recent mobility tracker earlier this month has indicated higher gas prices have resulted in higher wait times and rideshare prices for both Uber (NYSE: UBER) and Lyft, “LYFT wait times to +46% higher than pre-Labor Day levels in the past two weeks, relative to +33% in the two weeks prior. UBER experienced smaller moves.”
Other analysts on the Street, however, do not side with McTernan and are cautiously optimistic about the stock, with a Moderate Buy consensus rating based on 17 Buys and eight Holds. The average LYFT stock forecast is $56.96, implying an upside potential of 67.9% from current levels.
While analysts are cautiously optimistic about both stocks, based on the upside potential over the next 12 months, Lyft seems to be a better buy. However, according to analyst McTernan, over the long term, compared to Lyft, other players in the ridesharing universe “offer more compelling upside when viewed through a longer-term lens.”
Nonetheless, McTernan’s view may change if the merger of Lyft with DoorDash comes to a pass.
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