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.
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 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.
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, 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.
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.