Ride-hailing rivals Uber and Lyft have a "secular growth story to tell," according to a new analyst report, but also share a perceived threat: plans from Tesla for a robotaxi service. Analysts with Melius Research initiated coverage of both Uber stock and Lyft with neutral, or hold, ratings Monday, citing uncertainty from autonomous vehicles.
"The new debate for rideshare turns to the elephant in the room — the impact of autonomous vehicles (AV) on the ecosystem," Melius Research analyst Conor Cunningham said in a client note.
Plans for a potential autonomous robotaxi service from Tesla have weighed on Uber and Lyft stock since April. That was when Tesla Chief Executive Elon Musk said the company would reveal a "robotaxi" product at an event Aug. 8.
"The prospect of a new entrant into the market brings a cloud of uncertainty to an industry just starting to click," the Melius report said.
The robotaxi concerns have contributed to slumps for both companies. Uber stock gained 24% in the first three months of the year but is down 11.5% since. Lyft shares gained 28% in the first quarter and are down 35% since. Bloomberg reported earlier this month that Tesla would delay the event until October, sending shares of both Uber and Lyft temporarily higher.
Uber, Lyft Robotaxi Debate
Despite the event's delay, the debate over what autonomous vehicles mean for ride-sharing rages on.
It is possible Uber and Lyft will provide the consumer app powering fleets of autonomous vehicles. Uber, for instance, has a partnership with Google-backed autonomous vehicle operator Waymo. But Musk's indication Tesla will operate its own services is an "overhang" for both Lyft and Uber stock, the Melius report said.
"The answer to the AV impact on rideshare is probably somewhere in the middle of a scorched earth approach and partnering with rideshare platforms," Cunningham wrote. "But base assumptions should be that Tesla is going to go at it alone (at least to start) and potentially add a long-term competitor to the rideshare industry."
Some view it as too expensive for an AV developer to also build a rideshare network. Yet Cunningham said that argument is "eerily familiar" to how UPS and FedEx once viewed Amazon's plan to build its own logistics network. The timeline for when Tesla could deliver a robotaxi business at scale remains unclear. "But it is clear Tesla sees a huge opportunity with AVs," Cunningham wrote.
Uber Stock: Consolidation Pattern
Despite the potential risk from AVs, Melius views Uber and Lyft as having "ample growth opportunities ahead." Both companies appear primed to increase active customers and ride frequency through 2026.
But, for investors, that growth appears "baked into consensus after both companies hosted two high-profile investor days this year establishing long-term targets," Cunningham wrote.
With those factors in mind, Melius placed a hold rating on both stocks. The firm's report gives Uber a price target of 77 and Lyft a target of 15.
On the stock market today, Uber stock is up a half-percent at 67.52 in recent action. Lyft stock is up about 1% at 12.44.
Meanwhile, Uber stock has formed a consolidation pattern with a potential buy point of 82.14, according to MarketSurge pattern recognition. The stock has gained 9% this year, trailing a 16% gain for the S&P 500.
Uber will report second quarter earnings on Aug. 6. Lyft will report its quarterly results Aug. 7.
