Reaching profitability has proven to be a
challenge for both Uber and Lyft. Paying drivers
is a huge expense, and Uber’s fierce competition
with Lyft for customers has led both companies to
offer rides below cost. Drivers for both companies
complain about declining earnings, and they
can easily switch between platforms, making
it difficult for either company to further reduce
driver costs and keep fares cheap for passengers.
Uber said it plans to give bonuses to qualified
drivers and is setting aside an undisclosed
portion of its stock for drivers to buy.
Its unprofitable history may force Uber to
eventually raise its ride-hailing prices unless it can
reduce its costs by shifting to driverless cars or
expand into other markets and lines of business.
But Uber’s operating losses declined from $4
billion in 2017 to $3 billion in 2018, indicating it
could be heading in the right direction.
“They’re showing that they’re capable of controlling
their costs, which has been a concern of ride
sharing companies in general,” said SharesPost
analyst Alejandro Ortiz. “That’s a sign that will be
looked on favorably in the next few weeks.”
Lyft beat Uber to the stock market last month
with an IPO that raised $2.3 billion, but its shares
have been backsliding after an early run-up.
Lyft’s stock currently is hovering around $61,
down from its IPO price of $72.
The rocky start may have prompted Uber to
tamp down its IPO ambitions. The company
is expected to try to raise roughly $10 billion
and seeks a market value of $90 billion to $100
billion, according to the Wall Street Journal.
That’s below earlier estimates of $120 billion.