Investing during the spread of the novel coronavirus means that you have to consider how companies are positioned during this challenging time. Some of them are positioned for success, while others aren’t. Unfortunately, buying Lyft (NASDAQ:LYFT) stock now would be an investment in a company that’s poorly positioned.
A better alternative would be a position in the more successful competitor Uber (NYSE:UBER). That company was already the ride-share leader in America before the spread of the coronavirus.
Today, the difference between Uber and Lyft is even more glaring. There are reasons to invest in neither one of those companies. However, if you must choose one, Lyft isn’t the right choice.
Not ‘Essential’ Enough
It’s a very challenging time for ride-share workers now. With local lockdowns in effect throughout the United States, oftentimes it’s only the “essential” workers who are allowed to drive anywhere.
For a business to thrive during the spread of the coronavirus, it needs to provide services that are considered truly essential. Driving people to concerts, bars, restaurants or sporting events isn’t really necessary.
Driving people to airports might be considered an essential function in some instances. However, with flight activity practically at a standstill, that part of the ride-share business is greatly minimized.
The same could be said about daily commutes to and from work, which used to be the mainstay of the ride-share business. Stay-at-home mandates have made it difficult for ride-share companies to profit from people’s trips to work and back like they used to.
Because of these issues, income for ride-share drivers is down sharply. One survey found that among drivers who are still working, their weekly earnings have declined by 50% to 80% within the past month. It’s difficult to make a living that way, so many Uber and Lyft drivers will likely need to find a different source of income.
Lyft Isn’t the Lifeline
In response to these issues, Lyft seems to have practically thrown in the towel. Lyft drivers must have been surprised to receive an e-mail message from the company suggesting that they work at Amazon (NASDAQ:AMZN) “as a way to earn additional income right now” as delivery people, grocery shoppers or warehouse workers.
That message might have felt like a slap in the face to some of the struggling Lyft drivers. They didn’t need Lyft to tell them that they could apply to work for Amazon, as if they weren’t already aware of this option.
In contrast, Uber has a viable option that Lyft doesn’t have. Uber drivers can pivot to Uber Eats, a service that offers home delivery of meals and groceries.
With so many people staying at home and ordering food deliveries, Uber Eats has experienced a major boost in business activity. Uber CEO Dara Khosrowshahi observed that this is true, “even in Seattle,” a city that has been hit hard by the impact of the coronavirus.
As InvestorPlace contributor Ian Bezek notes, “Lyft isn’t meaningfully involved in the food delivery space. That means Lyft is effectively idled as ride-sharing demand has plummeted in recent weeks.” Meanwhile, Uber is likely to add to its already considerable market share as home-confined consumers turn to Uber Eats for essential food-delivery service.
The Takeaway on Lyft Stock
In summary, one ride-share company responded to the coronavirus crisis by referring its employees to Amazon. The other pivoted its workers to a viable alternative within the same company. Clearly, Lyft stock is not the best choice right now among ride-share investments.
David Moadel has provided compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets. As of this writing, he did not hold a position in any of the aforementioned securities.