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And now let’s dive into today’s Trade of the Day…
Last week, shares of ride-share company Uber (NYSE: UBER) popped hard.
At one point last Thursday, the stock was up 42% at its peak.
Fellow ride-share company Lyft (Nasdaq: LYFT) popped as well.
The strength in these two companies came on the news that Uber executives said the company has $10 billion in cash reserves to withstand the effects of COVID-19.
In response to that, I said…
They better say goodbye to that reserve because I believe they’re going to hemorrhage through it very quickly.
Just remember, Uber was bleeding cash before any of this panic started.
In fact, in 2019, Uber’s net income was down $8.5 billion.
How on Earth is the company going to survive this pandemic?
Think about the health risk right now…
Will any Uber or Lyft driver want a potential COVID-19 carrier off the street hopping into their car? Uh, no.
And on the flip side, will any customer want to jump into a car with a possible COVID-19 carrier behind the wheel?
Heck, even if the last passenger in the back seat was a carrier and you’re the next one to get in, you’re at risk.
Yea, that’s right. You know that stranger who was just in the back seat of a ride-share – who coughed on the seat – that you’re now sitting on?
That’s how easily this virus can get passed. So again, that’s a big plate of “no.”
Quite honestly, this is a major lose-lose situation for the current ride-share business model. That’s why I think both Uber and Lyft are toast.
As ride-share companies bleed cash to weather this storm, I think both companies are in big trouble.
Action Plan: In The War Room, members played puts on Lyft.
Well, because while Uber has around $10 billion in cash reserves, Lyft has around only $500 million. And remember, both companies still operate at a loss.
Lyft has $7.65 in cash per share – which I believe is a reasonable downside target. As I said last week, ride-sharing companies are currently “coronavirus distributors.”
Join me in The War Room today so you’re there for our next profitable recommendation!