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Why Uber and Lyft Could Slip Again despite Today’s Recovery

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Uber and Lyft suffer massive losses on Monday

American ride-hailing companies Uber (UBER) and Lyft (LYFT) saw massive sell-offs yesterday. While Lyft stock fell by 5.8% on Monday, its rival Uber fell 10.8%. Both of the ridesharing companies underperformed the broader market. On Monday, the S&P 500 Index, the NASDAQ Composite Index, and the Dow Jones Industrial Average fell 2.4%, 3.4%, and 2.4%, respectively.

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Tuesday recovery

On Tuesday at 8:58 AM EST, Lyft stock was up 2.1% at $49.17, and Uber was trading with 3.3% gains at $38.47 in the premarket session. Today’s sharp recovery in ridesharing companies could be a result of short-covering by traders who initiated short positions in the last couple of days. Also, the broader market recovery might help these stocks recover today.

In the last couple of days, Lyft stock lost nearly 12.7%, while Uber, which started trading on the NYSE last Friday, has fallen 17.6% from its IPO price of $45. During this period, the S&P 500 Index and the NASDAQ Composite Index fell by 2.1% and 3.3%, respectively.

What to expect next

It’s true that Uber’s journey as a public company has started during a period of broader market sell-offs, which could be one of the factors that pressured its stock in the last couple of days. Nonetheless, we should note that during this period, both the ridesharing companies have underperformed the broader market.

The key factor that triggered the massive sell-off in the broader market is that US-China trade tensions have increased, keeping the possibility of further sell-off open. So, any negative news that triggers another round of sell-offs in the key US indexes could take Uber and Lyft down further.

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