Uber and Lyft both hit historic lows and continue struggling since IPO

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Lyft (LYFT) plunged more than 7% Tuesday and hit a new all-time low on Wednesday before recovering a bit. Uber (UBER) fell by nearly 6% Tuesday to reach a record level before rebounding a little Wednesday.

Investors want "bright evidence at the end of the profitability tunnel," said Daniel Morgan, senior portfolio manager at Synovus Trust Company.

Lyft, however, has recorded a remarkable growth in revenues. Sales increased by more than 70% compared to the same quarter of the previous year. But Uber's revenues have increased by a much more pedestrian rate of 13% compared to the second quarter of last year.

Uber is much bigger than Lyft, so it's no surprise that its sales are not growing as fast as Lyft's. But with all the hype surrounding Uber's IPO, it's disappointing that revenues are not rising faster, Morgan said.

Unicorns without wings

Can Uber and Lyft live up to the hype surrounding them before their IPOs?

Morgan's company still has small positions in both companies. But he remains skeptical about their assessments, even after their massive declines. "How will Uber of Lyft achieve profitability?" The prices of their shares are still causing concern, "he said.

Of course, some may remember how Facebook (FB) also collapsed in the first few months following its IPO in 2012 – it has since increased due to strong sales and earnings growth. Amazon (AMZN) lost money for years before becoming profitable.

So, if you are an investor planning for long-term goals like retirement, it might be worth taking a flyer on Uber and Lyft. They could very well become market favorites for the next decades.

But Facebook and Amazon are undeniably leaders on the market – even when they have become public.

Uber and Lyft are in a very different place. First, they are formidable threats to each other. Uber also faces competition from Didi, Ola, Grab and Careem in international markets.

Fast food companies are betting big on delivery. It might not pay
And outside the carpool, deliveries from UberEats still have big competitors in DoorDash and GrubHub (WORM).

Uber will not be back until 2023, predicts Stifel analyst Scott Devitt, who has a note "hold" on the company.

Investors are also increasingly skeptical about the ability of Uber, Lyft and many other prestigious unicorns to generate profits in the foreseeable future, noted Morgan.

The benefits needed to justify the hype

It's not just consumer businesses like Uber and Lyft that bleed red ink.

Soft (JOB), whose messaging tools are the darling of many workplaces (including CNN) continues to lose money. It is expected to record a quarterly loss of nearly $ 270 million Wednesday after revealing its first financial results since its direct listing.
And WeWork, the owner of WeWork, revealed during his recent filing as part of the initial public offering that he had lost more than $ 900 million in the first half of 2019.

These losses may not be a problem except for the fact that the US economy seems to be slowing down. Many experts fear that a recession will be possible by 2020.

"The pessimism surrounding WeWork is affecting Uber and Lyft," Morgan said. "These are all businesses with no income, what will happen if the economy turns south?"

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