Ride-sharing giants Uber, Lyft jump after Tesla's ‘toothless taxi' fails to excite investors

• Uber shares had been falling on the initial investor excitement leading up to Thursday's event but surged more than 9% on Friday on renewed enthusiasm.
• The buzz around Tesla's highly anticipated cybercab has largely dissipated due to a lack of detail on its latest full self-driving technology advancements and the company's failure to provide insight on its ride-sharing service strategy or economics, among other expectations investors had.

Tesla's hyped robotaxi unveiling posed a threat to Uber's ride-sharing aspirations, but it has turned into a boon for the stock instead.

Uber shares had been falling on the initial investor excitement leading up to Thursday's event — particularly slumping in early August and mid-September — but surged more than 9% on Friday on renewed enthusiasm that the company is well positioned to advance its autonomous vehicle offerings. The move pushed the stock to a 52-week high and it was leading the S&P 500 higher during the session.

That is a massive turnaround for Uber's stock, which is now up nearly 22% over the past month and about 38% for the year. Lyft, another major player, is also surging about 10% on Friday. By comparison, Tesla's shares are plunging during Friday's trading session and are down more than 11% this year, vastly underperforming both the S&P 500 and the Nasdaq, which have each gained around 22% so far this year.

The buzz around Tesla's highly anticipated cybercab has largely dissipated due to a lack of detail on its latest full self-driving technology advancements and the company's failure to provide insight on its ride-sharing service strategy or economics, among other expectations investors had.

"TSLA's toothless taxi is a best-case outcome for UBER," Jefferies analyst John Colantuoni said in a Friday note, noting that the electric car maker provided ambitious targets but little signs of feasibility.

"TSLA did not provide verifiable evidence of progress toward L3 autonomous technology, which makes it difficult to assess feasibility of the targets outlined at the event given there is no precedent for achieving higher levels of autonomy using a vision-only approach (instead of a sensor-fusion approach)," Colantuoni said. "We believe this helps minimize the ongoing overhang on UBER's stock from TSLA's aspirations in the robotaxi space."

The Jefferies analyst kept his buy rating and $100 price target, which suggests a roughly 28% jump from Thursday's close.

According to Colantuoni, the existence of robotaxis could ultimately expand Uber's total addressable market, given that a supply increase would drive lower-priced autonomous vehicle offerings over time that eventually expands the use cases for ride sharing. Uber is currently the world's largest ride-sharing company.

"We believe AV developers will ultimately choose to partner with rideshare players instead of pursue standalone fleets. We also see UBER uniquely well-positioned in the rideshare space to help AV developers" support sustainable growth through optimizing logistics, providing fleet management expertise and helping navigate local regulations, among other benefits, the Jefferies analyst said.

Although Tesla appears committed to developing its robotaxi fleet without partnering with existing ride-sharing platforms, Colantuoni expects it could ultimately have to look into this option.

Tesla "potentially underappreciates the obstacles to scaling a robotaxi fleet" and could struggle to scale its fleet operations without offering access to demand through Uber and Lyft, he said.

Bank of America analyst Justin Post similarly views the Tesla event as a positive for Uber, reiterating his buy rating on the stock on Friday. Longer term, the analyst said increasing competition between Tesla, Google's Waymo and several other AV competitors in California could benefit Uber, given its potential to partner with multiple AV providers. He also speculated that, perhaps, owners of Tesla's cybercab could one day put their cars on a ride-sharing network such as Uber or Lyft.

"While investors may see little change to potential competition from Tesla long-term (5+ years), we knew a CyberCab prototype was coming and the event lasted only 19 minutes with less concrete details & timelines than feared for Uber," he said in a note to clients.

Bernstein's Toni Sacconaghi also found that Tesla's event was "underwhelming and stunning absent on detail," adding to the bull case on other major AV players.

Sacconaghi reiterated his outperform rating on Uber and market perform on Lyft, saying that the ride-sharing platforms can benefit from partnering with AV makers and, over time, add value for those that are operating fixed fleets.

Lyft shares are down nearly 9% year to date, and less than a third of analysts rate it a buy. Its average price target suggests potential upside of about 6%, according to FactSet.