Uber to widen investments in money-losing business segments in search of higher profit

Two of the market-dominating ride-hailing services in the U.S, Uber Technologies and Lyft Inc have recently been announced to have chosen different paths to seek higher profit. While Lyft announced plans of improving investments in the core ride-hailing unit, Uber expressed a desire to diverge investments into other, currently money-losing, segments to improve their profitability.

Only recently, Uber had declared that its target of company-wide profitability is more likely to be achieved in 2020’s Q4 rather than in the next year as previously estimated. Following the company’s optimism on Thursday, shares were reported trading 9% higher on Friday. The aforementioned measure, however, doesn’t account for stock-based compensation as well as a few other items. Including these, Uber is still anticipating an over $1 billion loss in fiscal 2020.

Uber Is A Much Bigger Market Player As Compared To Lyft

While Uber and Lyft are generally categorized as competitors, Uber is a much bigger player in the ride-hailing niche. In 2019, Uber generated $3.8 billion in revenue from January to September versus a much lower $956 million that Lyft generated in the same period. Uber’s market value is at $69 billion currently that is almost five times as compared to Lyft’s market value. Uber’s worth is also higher than that of General Motors Co.

Another major difference is Lyft’s primary focus being confined to North America while Uber is operational in multiple markets across the globe. The latter, however, have recently faced regulatory issues in Germany and London.

Thanks to the single subscription model that Lyft introduced in October, its retention of repeat riders (high-paying) improved significantly in the past few months. Uber, on the other hand, announced on Thursday that in the upcoming months, its loyalty programs (food delivery and rides) will be combined to form a single plan. The move, as per Uber, has the potential to turn 2020 to a year of subscriptions for the company.

Uber Posted A $777 Million In Adjusted EBITDA Loss In The Third And Fourth Quarters

A monthly subscription scheme was introduced by Uber in 2018 that was directed at helping riders sidestep the higher prices due to weather complications and traffic. The scheme is available in 40 cities across the U.S. Other than that, Uber also has a cross-platform rewards program for its valuable customers.

Uber’s ride-hailing unit is currently profitable for the company contributing to around 75% of its total revenue. Other segments including Uber Eats, long-haul trucking operations, development of self-driving cars, and commercial passenger drone shuttles, however, continue to weigh on its performance.

All of the other segments are currently in a loss for Uber with its Eats unit posting a $777 million in adjusted EBITDA loss in the third and fourth quarters of 2019.