Although he didn't say so explicitly, a Stifel analyst notes that Uber (UBER) - Get Uber Technologies Inc. Report and Lyft (LYFT) - Get Lyft Inc. Report are doing something that could bring them closer to profitability.
That would be a decrease in rider incentives.
"Rider incentives are being reduced across the industry," Stifel analyst Scott Devitt wrote in a note.
Both Lyft and Uber said on their first quarterly conference calls that they're seeing lower rider incentives in the ride-hailing business at large, and Devitt noted that "we view this as a positive development for the industry and given the timing of Uber's commentary, we believe the trend to competitive rationalization extended at deep into 2Q," said Devitt.
Basically, Uber and Lyft will look to give fewer money-back rewards to riders and stop lowering prices. Previously they've competed to boost revenues and win market share, which has contributed to widening net losses. Now, the ride-hailing market leaders are looking to continue adding riders while pushing towards eventually turning a profit.
Dewitt said there may be some "demand elasticity," or rider sensitivity to price, but he still expects net rider adds to increase for Lyft for 2019.
As a result, Dewitt raised his 2019 revenue estimates for Lyft from $3.29 billion to $3.34 billion and $4.2 billion to $4.3 billion. He's now looking for a 2019 net loss per share for Lyft of $12.40, lower than his previously estimated $12.41. He increased his price target to $76 from $70.
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