As Uber and Lyft reached their public-market nadir in mid-March, you would have been forgiven for thinking they were heading under. If the markets are somewhat efficient, why else would America’s top two ride-hailing companies shed two-thirds and three-quarters of their value, respectively, in just over a month?
As we know now, both companies quickly recovered and have since regained much of their former value. The two public firms have guided for a sharply unprofitable Q2 2020, but investors appear content to see their improving results as evidence that the worst is behind them.
Airbnb is another company that could be out of the worst of it and shared two data points lately that cast positive light on its operations. Three of the most famous American unicorns that were hit among the hardest by the pandemic, then, are coming back to a degree.
Today I want to parse the three companies’ public notes regarding their performance so we can track how their fortunes have changed. This will help us understand how much things have improved since their collective value reached all-time lows. And, it turns out that Uber and Lyft might have some good news for Airbnb shareholders.
Uber, Lyft
In mid-March, on the same day that Uber and Lyft shares came off their record lows, Uber told investors that “ride volume has gone down by as much as 60%-70% in recent days in the hardest-hit cities like Seattle,” but that it could get through “even in the worst-case scenario of rides down by 80% for the year” with enough cash to survive.
That statement — that Uber could endure, even if ride volume collapsed for the full year — told investors that Uber and Lyft would likely stay going concerns, no matter what happened in 2020. Their shares rose.
We got more from the two companies when they reported earnings. In May, Lyft said the following:
More specifically, if rides on our ride-share platform remained at April levels, which were down approximately 75% year-over-year, for the remainder of the quarter, we expect we can manage to keep our Q2, adjusted EBITDA loss to under $360 million.
And, Uber, in its own earnings call, said the following:
COVID-19 has had a dramatic impact on rides with the business down globally around 80% in April. Still, there are some green shoots driving restrained optimism. We’ve seen week-on-week growth globally for the past three weeks. This week is tracking to be our fourth consecutive week of growth.
Uber went on to state that it “saw 9% trip growth and 12% gross bookings growth globally week-on-week” in the week before earnings. Sure, ride volume — Lyft’s only material revenue source, and Uber’s main profitability driver — was down sharply for both, but they had credible rebound stories.
So, what happened next? Lyft gave us a bit more in June, providing an intra-quarter update:
Rides on Lyft’s ride-share platform in the month of May 2020 increased 26% versus April 2020 and were down approximately 70% versus the same period a year ago. Ride-share rides have increased week-over-week for seven consecutive weeks since the week ended April 12, 2020. In the week ended May 31, 2020 ride-share rides were down approximately 66% versus the year ago period and increased 5.5% versus the prior week.
So from 75% down in April on a year-over-year basis, to 66% down in the final week of May. That’s somewhat better.
Lyft also told investors that its “Adjusted EBITDA loss for the second quarter ended June 30, 2020 will not exceed $325 million if average daily ride-share ride volume in June 2020 is unchanged versus May 2020 levels,” some $35 million better than it first warned.
Lyft shares have risen around 165% from their all-time, March-era lows before the start of trading today. Uber is up around 154% over the same timeframe.
The upshot: Formerly popular unicorns that struggled in the wake of COVID-19 — but cut costs— can convey to investors that they are recovering and can quickly regain their worth (both companies have laid off or furloughed thousands of employees).
Holding that point in mind, let’s turn to Airbnb.
Airbnb
Airbnb had to cut staff and likely delay its IPO earlier this year after its business sharply contracted in light of the pandemic. In a memo sent to staff, here’s how Airbnb CEO Brian Chesky described the situation in early May:
We are collectively living through the most harrowing crisis of our lifetime, and as it began to unfold, global travel came to a standstill. Airbnb’s business has been hit hard, with revenue this year forecasted to be less than half of what we earned in 2019. In response, we raised $2 billion in capital and dramatically cut costs that touched nearly every corner of Airbnb.
The company cut about 25% of its staff in response to the declines. It was a pretty tough few months for Airbnb. Since then, however, things have improved.
First, was this bit of news, as reported by The Verge earlier this week:
According to Airbnb’s CEO, the number of nights booked at US listings between May 17 and June 3 was greater than the same weeks from the previous year, and similar increases in domestic holidays are being seen in other countries including Germany, Portugal, South Korea and New Zealand.
And then the following nugget from the firm, as transcribed by Good Morning America from today:
“From May 17 to June 6, the three-week period, we did more nights booked than that period of time last year… does this represent a recovery or pent-up demand? No one knows yet … But I will tell you, none of us in our darkest of hours forecasted [that] even [during] that period of time, we would see as many people traveling over Memorial Day this past year as the year before.”
That’s even better.
You see the point I’m trying to make: Airbnb is a few months behind Uber and Lyft, but it has also made cuts, waited out what could be the worst of the pandemic and is now seeing demand come back. Given the ride-hailing example, Airbnb’s value should be recovering around now.
Is Airbnb healed and ready to go public? I doubt it. But the timeline for it to float now feels much closer than it did, given the company’s recent results, and likely possible at a better valuation than we would have anticipated a few weeks back.
Of course, there are warning signs that COVID-19, far from being beaten, is regaining strength and could disrupt domestic and international travel in huge markets. That could push all three companies backward. But for today, after all the bad news, it’s nice to trace some improving lines instead of merely noting continued performance deterioration.