Uber and Lyft stocks soar as Americans travel despite skyrocketing inflation

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Uber’s shares soared on Tuesday after the company reported better-than-expected sales and reported positive first-quarter cash flow despite rising inflation and fears of a looming recession — a sign of the strength of American travel demand, which is helped by recent share price gains Lyft and hotel operators Marriott and Hilton have boosted shares in the rival.

Important facts

Uber shares rose as much as 14% to $28.20 in early trade Tuesday after the company reported record second-quarter customer bookings of $29.1 billion (up 33% year-on-year) and quarterly revenue of 8 $.1 billion, more than doubling year-on-year and beating expectations of $7.4 billion.

Though the company also posted a $2.6 billion loss — fueled in part by a $1.7 billion loss from Uber’s stock investments — it reported its first quarter of positive cash flow, which grew by 780% this quarter million US dollars to 382 million US dollars.

In a post-earnings conference call, Uber CEO Dara Khosrowshahi acknowledged that the recovery in some U.S. cities, particularly on the West Coast, “is still lagging behind,” but said demand should continue to improve in the second half of the year , noting that Uber rides are back with growth of 24% year over year and 12% compared to 2019 to record highs.

In a note to clients following the report, Wedbush analyst Dan Ives wrote that the surprisingly better-than-expected results bode well for Uber’s ability to turn a profit while addressing inflationary pressures in the US and Europe, and those that still exist in some cities Braving driver shortages thanks to the recovery from travel and a growing proportion of people returning to the office.

“Travel is burning,” Vital Knowledge Media analyst Adam Crisafulli said in emailed comments Tuesday, noting that Uber’s resilient ridesharing business last quarter bodes well for rival Lyft (which also rose 13% on Tuesday). and hotel operators Marriott and Hilton should also have reported “superb” second-quarter earnings results thanks to resurgent travel activity.

key background

Transportation and leisure stocks have soared from pandemic-era lows as travel demand bounced back last year, but high inflation and fears of a recession this year have hit the industry particularly hard. Uber is down 36% this year, while the S&P 500 is down about 15%. Now, analysts are hoping for a turnaround: Out of nearly 50 tracking Uber shares, the average target price is nearly $48 per share — a more than 70% increase from current levels.

Surprising fact

In a report last month, Morningstar analyst Dave Sekera said Uber and Lyft are well-positioned to benefit if the pandemic continues to ease, noting that both companies’ shares are down on some of the world’s peers relative to other stocks “most undervalued levels” are traded market.

tangent

Marriott and Hilton shares are up about 15% over the past month, outpacing the S&P’s gain of about 10% over the same period. In a statement alongside Tuesday’s results, Marriott CEO Anthony Capuano noted that demand was up across all customer segments and said the company’s strong results underscore the momentum of the recovery and “consumers’ love of travel.” .

What to look out for

Lyft is expected to report results Thursday after the market close. Analysts expect the company to remain unprofitable, posting $988 million in revenue, up 42% year over year.

Further reading

Cruise shares tumble after Carnival announces $1 billion share sale (Forbes)

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