Uber’s Speed Could Limit Lyft

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The great ride-share recovery is no freeway.

Shares of ride-hailing companies fell Wednesday following


LYFT -6.34%

first-quarter report and went even lower after hours on


UBER -3.42%

earnings release that came 24 hours later. Uber said its full ride-share recovery in places like Australia and Hong Kong has been offset to some degree by continued weakness in places like India and Brazil, where Covid-19 case counts remain high. Meanwhile Lyft, which operates the majority of its business in the U.S., says its ride-share ride recovery peaked in March, at least temporarily, with volumes declining month over month in April as demand outstripped supply.

On an earnings call Wednesday, Uber chief executive

Dara Khosrowshahi

said the two factors determining driver supply are safety and earnings opportunities. The company’s focus on the latter, in particular, might have given it a leg up versus its U.S. competitor recently.

Lyft continues to forecast that it will turn profitable in the third quarter this year on the basis of adjusted earnings before interest, taxes, depreciation and amortization. But that forecast assumes a higher volume of rides and more rational pricing to the rider.

To get there, Lyft has been offering incentives to drivers through higher pay and bonuses in some cases, but it also seems to think its supply problem will naturally sort itself out to some degree. The company cites less government aid, more vaccines, historically superior economics relative to food-delivery driving and the desire for meaningful social interactions as several factors that should attract gig-economy drivers back to its platform.

Uber also stands to benefit from all of those factors and already seems to be seeing some of their effects. On Wednesday, the company said its own U.S. mobility bookings recovery picked up the pace in April on a sequential monthly basis. Even though ride-share drivers commonly “double app,” incentives can lead drivers to pick up rides from one platform more frequently than others. The Rideshare Guy recently cited an Uber promotion offering an extra $100 for a driver who completes three trips in a week. With both Uber and Lyft saying this week that their drivers are making up to $30 to $40 an hour in some U.S. cities, $100 is a significant bonus.

AB Bernstein’s

Mark Shmulik

suggests Uber’s aggressive driver incentives could be leading to shorter wait times and lower consumer fares compared to Lyft. He also notes the popularity of its membership program, Uber Pass, which includes Uber Eats, means riders might be more likely to open Uber’s app first and book without even opening up Lyft to compare, assuming Uber’s wait time and pricing are acceptable.

New data from Edison Trends suggest Uber’s more recent recovery in the U.S. could be coming at Lyft’s expense. Consumer spending on Uber, for example, hit a new post-Covid high the week of April 26, the data show, while Lyft’s post-Covid consumer spending peaked mid-March and has since fallen. According to Edison Trends, in the week of April 27 last year, Lyft riders spent 57% as much as Uber riders. In the corresponding week this year, that figure dropped to 44%.

That isn’t to say all is good for Uber. Global rides revenue missed Wall Street’s forecast by a sizable margin, even excluding a $600 million accrual related to driver classification in the U.K. Still, thanks to continued strength in its Eats business, the company also said April was its strongest month ever in terms of overall gross bookings, while last week was its best week ever.

Lyft investors betting on recovery momentum might want to switch lanes.

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Write to Laura Forman at laura.forman@wsj.com

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