Uber Profit Path Seen Slowed by Riders Taking Cheaper Rides

(Bloomberg) -- Uber Technologies Inc.’s path to profit is likely to be slowed by growing competition as a significant number of customers are willing to wait around for a cheaper ride, according to analysts at HSBC.

The company, which went public in May, will need to fend off “tough and persistent” rivals that cater to price-conscious consumers, Masha Kahn and Henning Cosman wrote as they initiated coverage of the stock with a hold rating. Lyft Inc. often prices 20-25% below Uber in New York and Daimler AG-backed Bolt is now doing the same in London, they said.

Uber shares have recovered much of the 18% decline seen in the first few days that followed the company’s Wall Street listing, but have still trailed the broader U.S. tech sector. HSBC gave the stock its 11th hold rating, while it has 23 buys and zero sells among analysts surveyed by Bloomberg.

Uber will also need to navigate tougher employment regulations and potentially higher taxes that could be imposed on the ride-hailing sector, the bank said.

In food delivery, “the big disadvantage is that Uber Eats does not have first-mover advantage in many markets,” meaning in some geographies it trails in terms of restaurant selection versus other applications.

“We struggle to make an argument that the risk-reward is skewed to the upside in the near term,” Kahn and Cosman wrote.

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