Posted in: Op-edBusiness News
Published:
April 19, 2020 10:00 AM UTC

Lyft Stock Is Plunging – It’s Only a Matter of Time Until Google Gobbles It Up

Google always should have had its eye on Lyft, and now that Lyft's stock has been devastated, Google is in a position to buy.
  • A Google-Lyft partnership always made sense.
  • Now that Lyft’s market cap has been slashed nearly in half, Google could be thinking about putting its massive cash pile to use.
  • The two are already working together, and an acquisition would be a natural next step.

Things are about to go from bad to worse for Lyft. Until recently, the rideshare stock had been trading alongside rival Uber. The two were moving in tandem as investors looked at the growing potential for the overall industry.

But with coronavirus significantly cutting down traffic, Lyft’s weaknesses are starting to rise to the top.

Lyft Stock Is Getting Pummeled While Uber Recovers

Uber and Lyft have traded together over the past few months, but in this economic downturn, Lyft’s glaring weaknesses are coming into the spotlight. | Source: REUTERS/Lucy Nicholson

Uber’s meal delivery service, Uber Eats, has been a lifesaver for the company’s business over the past month. While the number of customers looking for a taxi has dropped sharply, food delivery has seen an uptick.

Unfortunately, Lyft has no such model. Even the firm’s bike and scooter offshoot has been put on hold due to supply chain issues. Unlike Uber, Lyft hasn’t expanded beyond the North American market— so in times of crisis, the firm has very little room to pivot.

Uber (green) has seen a stronger rebound than Lyft (blue) because the company has more protection during this downturn. | Source: Yahoo Finance

Uber is trading less than 10% lower than it was at the start of the year, while Lyft is down nearly 35%. That’s probably not the end of the pain for Lyft either as rolling lockdowns in the U.S. continue to weigh on its business.

With an economic downturn thrown into the mix, Lyft simply can’t beat Uber. It may not even be able to stay afloat, and investors are starting to notice that.

Here Comes Google

While Google’s business isn’t immune to the economic pain, it’s strong financials suggest it will thrive while its peers struggle. | Source: REUTERS/Arnd Wiegmann

But Lyft’s pain could be Google parent Alphabet’s gain. The tech firm’s autonomous driving arm, Waymo, desperately needs a platform on which to roll out its fleet. Waymo has been partnering with various companies, as well as trialing its own customer-facing platform to find a B2C platform that works. But the company has yet to commit.

This could be Waymo’s chance to lock-in a great deal.

Back in February, when Lyft stock was trading above $50 per share, Northcoast Research’s John Healy pointed out that the firm made for an excellent takeover target for an autonomous vehicle developer.

A pure play network such as Lyft could be increasingly attractive from an M&A standpoint to the future winners of the autonomous race

Now that Lyft’s market cap has fallen to $8.7 billion over a matter of weeks, that’s even more true today.

Alphabet Likely to Make Acquisitions this Year

Alphabet, with $90 billion in cash and very little debt, is likely to be on the hunt for ways to put its money to use. The firm is in a prime position to make strategic acquisitions during this downturn because of its rock-solid financials and relatively safe business.

While Google will probably take a hit from a pullback in advertising spending, a higher volume of users should help offset some of that pain.

The bottom line? Alphabet could scoop Lyft up in an all-cash deal without seeing much of a dent in its finances. 

This is something Alphabet is almost certainly considering. This economic downturn is a golden opportunity for the company to invest in Waymo’s growth at a time when competitors can’t keep up.

Every major car company has a bet on self-driving cars, but the current climate means they’re strapped for cash. By contrast, Alphabet has a mountain of money that it can use to put its own autonomous vehicle program in a position to dominate the market coming out of this crisis.

A Lyft/Wamo partnership makes perfect sense, and now is the perfect time for Google to make that happen. | Source: Roman Tiraspolsky/Shutterstock.com

Not only that, but Waymo and Lyft are already working together.

A huge part of Lyft’s overall business model is transitioning to so-called “robotaxis” that won’t require a driver.

As Waymo has already begun to infiltrate Lyft’s fleet, it makes sense for the two to take that relationship further— especially if Lyft is struggling to stay afloat.

There has been chatter that the two would combine over the past year, but if ever there were a time for Google to strike— it’s now. 

Disclaimer: This article represents the author’s opinion and should not be considered investment or trading advice from CCN.com.

This article was edited by Josiah Wilmoth.

Last modified: April 17, 2020 6:53 PM UTC

Laura Hoy @Laura_h_says

Laura has been working as financial journalist covering US markets for more than a decade. Her work can be found in a wide variety of publications including Yahoo Finance, InvestorPlace, Nasdaq and Benzinga. She can be reached at LMarieHoy @ gmail.com