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Ride-Sharing Stocks a Rare Bright Spot in Otherwise Miserable Day for Tech

Mike Blake | Reuters
  • Ride-sharing stocks closed Wednesday as a rare bright spot for tech stocks in an otherwise weak day.
  • Shares of Lyft closed up more than 8% as investors rallied around the company after it said it's seeing rideshare recovery sooner than expected.
  • Lyft's recovery also brought optimism to Uber shares, which closed up 2.6%.

Ride-sharing stocks closed Wednesday as a rare bright spot for tech stocks in an otherwise weak day for the sector that's seen strong growth in the past year.

Shares of Lyft closed up more than 8% as investors rallied around the company after it said it's seeing rideshare recovery sooner than expected.

Lyft's recovery also brought optimism to Uber shares, which closed up 2.6%. It comes despite CEO Dara Khosrowshahi's cautious comments Monday at the Morgan Stanley Tech conference, saying he expects its mobility business to see some signs of recovery in the U.S. and Europe, though it's "too early to tell."

The tech sector's drop came as the 10-year Treasury yield extended its gains. The rate climbed to 1.49% Wednesday after hitting a high of 1.6% last week. Yields move inversely to prices. That rise has raised concerns for some about equity valuations and a pickup in inflation, CNBC reported. Higher bond yields can hit technology stocks particularly hard as they have been relying on easy borrowing for superior growth.

Investors rotated out of the pandemic's cloud darlings, as Twilio closed down 7.6% and Atlassian down 6.8%. Snowflake, which also was set to report earnings after the bell, closed down 8.7%. The largest tech stocks weren't spared either. Tesla shed 4.8%, while Amazon closed down nearly 3%. Apple and Microsoft each shed 2.5% and 2.7%, respectively. Alphabet closed down 2.6%.

Lyft comes off strongest week since lockdowns began

Lyft now expects to manage its adjusted EBITDA loss in the first quarter to $135 million, from the $145 million to $150 million it previously forecast, according to a Tuesday filing with the SEC. The company also said that the last week of February was its best week in terms of volume since pandemic lockdowns began in March of 2020, and expects recovery to continue into this month.

The company's burgeoning recovery comes as more states are starting to lift Covid-19 restrictions and vaccines continue to roll out across the nation.

"We believe LYFT is poised to show an inflection towards positive year-over-year growth starting the week of March 21, which we think will accelerate into the summer months barring any setbacks with vaccine roll-outs. We see LYFT's Q1 rides outlook as a positive, especially given the still uncertain landscape of the pandemic and weather issues in certain regions," according to CFRA analysts on Wednesday.

Truist analysts said Tuesday that the company's update on business trends gives the firm "incremental confidence that business trends should continue to improve as local governments ease restrictions on social activities and people return to work with C-19 gradually waning."

"We believe further easing of restrictions, particularly in Texas, which has completely reopened, could accelerate improving Y/Y trends through the Spring," they added.

Uber and Lyft have still maintained optimism they will become profitable by the end of this year on an adjusted EBITDA basis.

"At this point LYFT is seeing encouraging demand signs, and has been able to manage this demand while guiding to improved profitability while showing solid execution," Needham analysts wrote in a note to clients Wednesday.

--CNBC's Michael Bloom contributed reporting.

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