and Grab have recovered some of their lost market value over the past month, but a selloff this week has undermined the rally.
The shares of Uber Technologies Inc. and Lyft Inc. have risen more than 35% since mid-July, aided by their stronger-than-expected results earlier this month. Singapore-based
Grab Holdings Ltd.
, which is set to report its second-quarter performance on Aug. 25, has jumped 41%.
But the three companies’ shares have all fallen heavily this week. By Thursday’s U.S. market close, Lyft and Grab were down around 9% this week, and Uber had fallen about 7%.
“We are likely in a bear-market rally,” said Eli Lee, head of investment strategy at Bank of Singapore. He added that the recent strength in ride-hailing stocks could wane over the near term, as macroeconomic conditions remain highly challenging.
The three companies’ shares are still well down this year, losing more than $43 billion in market value. Japanese conglomerate
SoftBank Group Corp.
, whose Vision Fund made big bets on Uber, Grab and Chinese ride-hailing firm
Didi Global Inc.,
has seen the value of those investments plummet, although it recently made a $1.5 billion profit from selling its Uber stake.
Joohee An, a lead portfolio manager at Mirae Asset Global Investments, said her fund has a small position in Grab, which she thinks is poised to benefit from Southeast Asia’s reopening and recovery from the coronavirus pandemic. “However, the team would still carefully watch…both its top-line and bottom-line growth trend before meaningfully increasing the position, as share prices in the tech sector are very volatile,” Ms. An said.
This week’s dive in the American depositary receipts of
, a Southeast Asian company that competes with some of Grab’s businesses, demonstrated the market’s sensitivity to bad news, she said. Singapore-based Sea scrapped its full-year revenue guidance for its e-commerce business, and the company posted a wider quarterly net loss of $931 million.
Uber has posted more than $31 billion in net losses since 2014, its earliest publicly disclosed financial record. Grab, which has also burned through billions of dollars in cash, likely won’t have the same luxury Uber had in its growth spending, said Saurabh Rathi, investment chief of Singapore-based family office Carbon Graphite Advisors.
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“Will they have that much flexibility to keep losing money and investors say, ‘No problem; you show me profitability after 10 years’? I think that scenario has really changed—Wall Street will no longer be that accommodative,” Mr. Rathi said.
A limited supply of drivers on the companies’ apps has posed a roadblock to growth, since riders take fewer trips when fares rise. But in July, wait times for Uber riders and “surge trips”—higher priced trips that kick in when drivers are in short supply—were nearly at their lowest levels in a year, the company said. High Inflation has also led more people to become drivers and food-delivery couriers on Uber, Chief Executive
Ride-hailing companies depend heavily on independent contractors. In the U.S., any successful effort by lawmakers to classify those workers as employees would result in higher labor costs for Uber and Lyft, which could hurt their stock valuations.
Analysts say the companies largely have the means to fund themselves, be it through money from past capital raises, or cash generated by their businesses.
Uber, whose revenue in the three months ended June 30 more than doubled from a year ago to $8.1 billion, reported positive free cash flow from its underlying operations for the first time—fulfilling a promise it had made to investors. Lyft, which booked a 30% increase in second-quarter revenue to $991 million, is targeting $1 billion in adjusted earnings before interest, taxes, depreciation and amortization and more than $700 million of free cash flow in 2024, CEO
said. Both companies posted losses for the quarter.
Grab, which operates in eight countries and offers ride-hailing, delivery and payments services, had $3.4 billion in cash and cash equivalents as of March 31, thanks to funds it raised last year from a debt-financing deal and its merger with a special-purpose acquisition company.
Grab and some of its peers in Southeast Asia “raised money at the top of the market, so that their balance sheets are sufficiently well-funded to weather a number of years of cash-burning situation,” said Nirgunan Tiruchelvam, head of consumer-sector research at Tellimer, a data provider.
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