Ride-share companies Uber Technologies, Inc. (UBER) and Lyft, Inc. (LYFT) report earnings this week, with a horrible first quarter already baked into expectations as a result of the coronavirus a pandemic. Uber is better able to direct you to release, because the UberEats service has generated a healthy stream of income as a result of stay-at-home orders. Lyft is just now pulling up to a delivery program, but this place is already saturated with competitors.
Both companies are burning cash at a rapid pace, or the publication of a profit, since its arrival in public. Uber has told the analysts to expect profitability by the end of 2020, but it is likely to delay the date because the carpool is as toxic as the aircraft and cruise ships now thanks to a close contact with potentially infected drivers, and sanitation which may be haphazard and inefficient. It is a scenario dangerous because the cash flow dry up if the customer’s buying habits fail to return to pre-crisis levels in the coming months.
The financial pressures begin to take their toll, Uber furloughing 20% of its workforce, while Lyft’s termination of 17%. Analysts have been surprisingly favourable, the maintenance of high ratings, because they were waiting for business to return in the coming quarters. However, the people of Wall Street have done a poor job of modeling the consequences of the pandemic up to the present, and their comments are designed to increase their businesses, rather than to provide investors with unbiased analysis.
UBER Weekly Chart (2019 – 2020)
The creation of the public company to $42 May 10, 2019, and the stock softened in a trading range between $36 and$ 45. A June breakout posted a record high of $47.08 before the turn, the tail of a down swing which has broken the range support in August. The subsequent decline continued in November, when the stock displayed an object low to $27.55. Upwards subsequent has gained strength in February 2020, the trim at the ipo opening of the printing and .786 Fibonacci sell-off of the retracement level.
The bottom have left the position in March, with a vertical drop which broke out in November to support in a March 12, sell gap. The sale ended a few days later, to $13.71, which marked descending trend line support and the 1.618 Fibonacci extension of the three-month rebound. The rally in April and then back to the .618 sell-off of retracement, maintaining the theme of harmonically controlled the price action.
The weekly stochastic oscillator is now at the crossroads in a cycle of sell, overbought level, plan at least six to ten weeks of relative weakness. In turn, this suggests that the stock will retrace more than seven weeks of recovery wave. During this time, the balance volume (OBV), the accumulation-distribution indicator recovered about half the losses registered during the fall, lowering the odds that the pullback is going to break the March lows.
LYFT Weekly Chart (2019 – 2020)
The creation of the public company on March 29, 2019, the display of an all-time high at $88.60 at the first session and entering a downward trend that has hit an object low to $37.07 in October. A bit of a buying channel then took control, adding less than 20 points in the month of February 2020 high at $54.50. A poorly received earnings report later in the day caused a reversal and sell-off, which accelerated when international travel was grounded and stay-at-home, orders have been issued.
The stock has broken October headrest in March and went into a vertical decline, eventually hitting a low of $14.56, March 18. The rebound in the month of April recovered just half of the state of the down-and, unlike Uber, failed to cheer up broken-2019 support. In turn, this reinforces resistance in the mid$30, while greatly increasing the odds that the next recession will reach or break the March lows.
The weekly stochastic oscillator has also crossed into a sell cycle, indicating that the bears have regained control. In addition to these concerns, OBV has recovered only one-third of the sponsorship lost in the first quarter of the rout, possibly adding a final nail in the coffin of the Lyft downward trend. Taken together, investors can not exclude that the company will be forced to dilutive secondary offerings, or worse yet, are unable to survive without a takeover by a rich suitor.
The Bottom Line
Uber is better than Lyft, to survive the pandemic, but neither company is likely to reward investors in the next one or two quarters.
Disclosure: The author held no positions in the aforementioned securities at the time of publication.