Nearly every travel-related stock has been crushed by the coronavirus. Ride-sharing is no exception. Lyft's
California Ruling
There's been constant scrutiny about the business model of ride-sharing companies which classifies drivers as independent contractors. It allows them to reduce their tax burden and not pay benefits. Earlier in the month, a California court ruled that Uber and Lyft drivers are classified as employees based on the state's Assembly Bill 5 which was passed to ensure that gig workers are treated better by their employers.
It would mean that companies that employ gig workers would have to pay unemployment insurance and abide by minimum wage laws. In response, the companies filed an appeal and said that they would have to cease operations in California the appeal failed.
However, a state appeals court ruled in favor of Uber and Lyft which means that normal operations are continuing with drivers continuing to be considered independent contractors. Uber and Lyft's stocks perked up on the news.
In November, Proposition 22 will be on the ballot which will keep drivers on platforms like Uber, Lyft, DoorDash, Postmates, and Instacart classified as independent contractors. In total, these companies have put $110 million behind the initiative.
Uber vs Lyft
At some point, the country will return to normal and people will start traveling and going out again which will mean demand will return for ride-sharing. That's when Lyft will recover. However, the company is going to be fighting for survival until then.
In contrast, Uber has multiple businesses. Uber sees itself as a logistics company rather than a ride-sharing business. It has three business segments - ride-sharing, food delivery, and freight. The pandemic has crushed ride-sharing but it's been a boon for food-delivery. If the pandemic gets worse, it'll drive more volumes and market share in this area. Further, food-delivery is currently a battle between Uber and GrubHub
Uber also has another business - freight - which might have the most long-term potential. Ride-sharing basically connects passengers and drivers, while food-delivery connects a restaurant, driver, and customer. Freight connects a truck driver with a company. It'll allow companies to outsource or scale up their cargo divisions as needed rather than it becoming a fixed cost.
Additionally, Uber can optimize truck routes which will let truckers make more money and deliver greater efficiencies. Just like Uber can monetize your car if you're willing to have strangers sit in it, it will help truck drivers monetize their trucks. Trucking is nearly a $1 trillion industry, and it seems likely that Uber can take a small share of this market.
