Lyft (NASDAQ:LYFT) is starting to enjoy an uptrend while Uber (NYSE:UBER) is trending lower. In the near-term, persistently negative news against the two firms may hurt the share price.
With Chicago approving a ride-hail congestion tax, both Uber and Lyft will face a further erosion in its operating advantages over taxis. The downtown zone surcharge will give the city $40 million in revenue while adding to ride-sharing costs.
On Nov. 14, New Jersey’s labor department said that Uber owes it $650 million. $119 million of that amount is interest and penalty costs. With yet another cost slapped on Uber, the service will head faster towards simply becoming a taxi service. Investors will have fewer reasons to own either firm.
Although Uber and Lyft are potentially big players in the autonomous driving market, investors may look elsewhere to get that exposure.
Ambarella (NASDAQ:AMBA) and Nvidia (NASDAQ:NVDA) are primary winners in the self-driving market. Conversely, Lyft and Uber are looking more like commodity plays with hardy a competitive edge to justify the premium.
Upside Potential
A drop in Uber and Lyft usage and in those above-named cities and an appeal on the tax may cut the amount owed to the government. But Lyft bears (who have a 7.9% short float) may win in the end by betting the ~$13 billion valuation is too high.
Avoid UBER and LYFT stock for now.
