Ridesharing Wars; Apps vs car rental companies
There is a war going on in the ground transportation sector. More business travellers are using Uber versus renting a car, and this trend is not likely to end soon. Uber and lyft garnered 68% of the ground transport expenses, with uber alone accounting for 56%.
The Taxi business has imploded; in 2016 they accounted for 11% of ground transportation expenses, and in 2017 it dropped to 7%. Rental companies are not faring any better; in 2016 they accounted for 33% of the ground transportation expenses, but that dropped to 25% in 2017 and is set to drop even lower this year. In line with our new strategy of replacing stock plays with option plays in the high-risk portfolio, an opportunity to short via puts could be close at hand.
Two companies stick out, HERTZ (HTZ) and Avis (CAR). Avis reported terrible numbers for the 3rd quarter; Revenues were $52 million below analysts expectations. HERTZ is fairing better, but the long-term outlook for this sector does not appear to be bright as both Uber and Lyft are set to garner more market share. Adding further pressure to the rental industry is the fact that the used car market is oversupplied, making it harder to get rid of their of their old vehicles.
The outlook for AVIS is much worse but the stock has already started to pull back, and the bearish crossover is at a more advanced stage than that of HTZ. However, if the current pattern is maintained and it can rally to the 36.00 ranges, then it would make probably make for a better short than HTZ.
Ride-Sharing War For Global Dominance
China’s largest ride-hailing app Didi Chuxing has snatched up the remaining shares of Brazil’s 99 car share service, Uber’s main rival in Latin America. The news comes days after Japan’s Softbank acquired a 14% stake in Uber, a move that helped the U.S.-based company shore up its shrinking balance sheet with fresh capital.
Ballooning losses for Uber
Newly released data shows that the embattled Silicon Valley company has accumulated nearly $5 billion in losses in its eighth year of operation — doubling Uber’s estimated losses of $2.5 billion in 2015. The financials were released as part of a prospectus ahead of Softbank’s acquisition.
While Softbank CEO Masayoshi Son may been seen as a white knight, his purchase comes at a bargain of $33 a share, deflating Uber’s valuation to $48 billion from $70 billion at its height in the summer of 2016. Despite the 30% discount from Uber’s previous valuation, it’s not a bad deal to take considering the money could help fund expansion and operations to combat competitor price subsidies. Full Story
The Scooter Wars who will win
Investors are pouring hundreds of millions into the scooter companies with the hope that the best-capitalized scooter company will win. But as the prior Rideshare Wars demonstrated, money alone is not enough.
For all the attention and money that Bird, Lime and Spin have raised, they are not going to win the Scooter Wars. The Uber of scooters is going to be Uber. Despite not having a single scooter, it is already a dominant incumbent with significant built-in advantages.
To understand why Uber will dominate the scooter sector, it is important to understand the nature of two-sided markets.
So when Uber bought Jump, the bike-sharing startup, it signalled the beginning of the end of Bird and Spin. Why? Because Uber already won the ride-sharing wars and now has a dominant source of demand for mobility solutions. When you combine this advantage with the lessons Uber learned from its first fight, the only hope for the scooter companies is an anti-Uber backlash — or to be bought by Uber. That is why Uber’s deal with Lime — the ride-hail giant is investing in Lime in a new $335 million round that values the electric scooter company at $1.1 billion — is so important. It is likely the first step toward an eventual acquisition. Full Story
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