Ride-Share Stocks Offer an Interesting Opportunity on Tesla News
Nothing fundamental has changed for Uber and Lyft.
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Tesla TSLA and semiconductor stocks SMH lifted the market to start the day, but, unlike the last few days, the breadth has been negative and declining. After the gap-up open, the S&P 500 rolled over and filled the gap morning gap on the chart. The strength created by Tesla is being used to do some selling.
Tesla is still trading up more than 10% and is squeezing some of the hardcore bears that have been betting against it for a long time. There are plenty of Tesla skeptics, including investment bank UBS, which states, "We don't doubt that [full self-driving] is making progress, but TSLA has talked up autonomy before, and we are skeptical that TSLA will have a 'cyber-cab' or ride-hailing service this decade."
Despite the very long-term time frame for Tesla's "cyber-cab" initiative, both Uber UBER and Lyft LYFT are taking hits on this headline. Both stocks have drooped sharply from the highs they hit in March. Nothing fundamental has changed, but market conditions triggered selling, which has caused technical problems and created downside momentum.
The news today from Tesla is making the Uber and Lyft charts look even worse, but Uber's earnings are coming up on May 8, and Lyft will report on May 7. There is no reason that these companies will see any impact on their reports from robotaxis.
Uber has an average price target of $87.19, and Lyft has a target of $16.50. Both stocks had strong reports last quarter and gapped higher on the news.
Market conditions are weakening Wednesday morning, and that may delay a rebound in these stocks, but cyber-cabs are unlikely to be a competitive threat for at least a decade, which is creating a short-term opportunity in ride-share stocks.
At the time of publication, Rev Shark was long LYFT and UBER.
