The name Uber (UBER 1.46%) has practically become synonymous with ride-hailing... at least within the United States. And understandably so. Uber Technologies didn't just mainstream the business here. It controls roughly three-fourths of the country's ride-hailing market, according to Bloomberg.
Uber isn't the only ride-hailing name capitalizing on the country's changing personal mobility norms though. While it's still a distant second in terms of market share, Lyft (LYFT -2.90%) is arguably the much better growth investment right now. Uber shares have been soaring, leaving them at an uncomfortably high valuation. Lyft shares, however, continue to drift sideways despite the company's recent swing to profitability that's expected to widen for at least the foreseeable future.
Lyft is catching a ride on the industry's brisk tailwind
For years it felt like there was only room for one ride-hailing titan within the U.S. market. But the industry's ongoing growth is forcing investors to rethink this presumption. Lyft's continued revenue growth finally pushed the company out of the red and into the black in 2024. And analysts expect more of the same progress at least through 2027, making Lyft unquestionably fiscally viable.
So why haven't Lyft shares budged since falling back in 2021 and 2022? Again, as much as Uber is the preferred name for most people needing to get from point A to point B, it's even more of the go-to stock for anyone looking to plug into the personal mobility movement; most investors aren't even interested in considering any other option.
But perhaps they should be. There's certainly going to be more than enough business to go around, after all, here and abroad.
The statistics are a bit staggering, actually. Back in the mid-1990s, for perspective, roughly two-thirds of age-eligible teens held a driver's license. Now that number's been pared back to only around one-third. Most of these young people are of course going on to get their license later in life. Increasingly though, many of them aren't. In this vein, automobile ownership in America is generally -- even if slowly -- on the decline.
Image source: Getty Images.
The trend is accelerating, too, as younger generations are more likely to be comfortable with the sociocultural changes that technology causes in their lives. A recent poll taken by Deloitte indicates that while only 11% of the United States' 55-and-up crowd would consider giving up access to their own vehicle, 44% of the 18-to-34 cohort would be willing to do so. Access to alternatives like Uber and Lyft are of course part of the reason for this shift, although plenty of consumers also cite costs of car ownership as a factor.
While the bulk of Lyft's revenue is generated within the U.S., to the extent it does business overseas, those markets are undergoing a similar cultural shift largely for the same reasons. To this end, Precedence Research believes the global ride-hailing market is set to grow at an average annualized pace of more than 18% through 2034, still led by the North American market that Lyft serves by the end of this time frame.
Investors are figuring out there's more reward than risk
There's still risk here to be sure. But not nearly as much as the stock's recent inaction might lead you to believe. The industrywide tailwind is strong, and Lyft's year-to-date revenue growth of 12% says the company's plugged into it. And increasingly so. It's looking for top-line growth in the mid-teens for the quarter currently underway... a pace the analyst community believes will be sustained for at least couple of more years.
Data source: StockAnalysis.com. Chart by author.
Perhaps the real measure by which Lyft's risk is overstated and its potential is understated is on its earnings-based valuation. While the stock's price of a little more than 50 times this year's plausibly expected per-share earnings is rich by marketwide standards, for a growth stock of this ilk that's only priced at roughly 35 times next year's expected bottom line of $0.46 per share, it's actually quite reasonable. It's especially reasonable given the amount of margin-widening growth that's on the longer-term horizon.
Just don't tarry too long if you're interested. Although the stock's not made a bit of net progress since mid-2022, a closer look at its chart suggests more and more bulls are starting to test the waters here. Many of these buyers are likely seeing the industrywide tailwinds discussed above, and recognizing that Lyft is indeed capitalizing on them. If and when shares reach a tipping point, it's possible we could see more explosive and prolonged gains like the ones that shares of rival Uber have produced of late.
Or if nothing else, it would be fun to own a piece of a scrappy company that managed to stand up to the industry's titan and prove that sheer size isn't everything.
