Barclays Report: Despite Weak IPOs, Uber And Lyft Can Be Profitable

A new report from Barclays Capital about transportation in New York City says Uber and Lyft can achieve profitability in the future despite their poor initial public offering (IPO) showings this year, according to a report by Bloomberg. 

Barclays analysts Jeffrey Meli, Adam Kelleher, Ryan Preclaw and Ross Sandler all said the ride-hailing apps are in a good position to eventually be profitable.

The report examined how high prices affect the number of Lyft and Uber rides, and it found that the services can actually raise prices to get to an operating profit with only a slight hit to ride levels, “disproving a key piece of the bear case.”

One of the key parts of the study was the introduction of a congestion tax in the state on taxis and hailed rides, which Barclays said provided the perfect example for a study on how price changes can affect demand.

The study is meaningful because Uber and Lyft, which both had IPOs this year, have struggled to keep their value. Uber has lost a lot of value and is down 39 percent since it debuted, and Lyft is down to 37 percent. This has affected investor confidence and worries about whether the companies will ever be able to reach a profit. Regulatory issues regarding ride-hailing around the world have also been a concern. One example is Uber losing its license to operate in London, a decision that is currently under appeal.

Lyft said publicly that it was going to be profitable by 2021, and Uber said it’s going to reach an Ebitda profitability at that time as well. Over all, the analysts said that it’s been a “net positive” when it comes to how ride-hailing has affected things socially as a whole, and that even though there’s a “correlation to gentrification, ride hailing increased rides in the least gentrified neighborhoods by 50 times, and filled a gap in transportation infrastructure.”