Uber, Lyft As Disruptors -- May 9, 2017

Updates

June 5, 2017: Chicago taxi cabs nearing extinction due to Uber, Lyft.  

Original Post

 

The other day there was a report that DFW was $10 million short covering for new parking garages and refurbishing of parking garages. The reason: fewer people are driving to the airport and leaving their car parked there while on a short business trip. Folks are taking Uber instead, the report said.

The headline: DFW airport faces $10 million shortfall as Uber, Lyft hurt parking revenue. 

The daily rate is $24.

The airport had budgeted to collect $80.7 million in parking revenues for the first six months of the fiscal year, which ends Sept. 30. So far, the airport has collected $76.9 million.
To compensate for the lower revenues, Donohue said the airport has deferred some technology projects by six to nine months.

Now this from today's Wall Street Journal: Hertz shares plunge on wide earnings miss. Shares were off more than 20% midmorning before regaining ground.

Disclaimer: this is not an investment site.

These stories should suggest to investors that it would be a good idea to look at each of their individual holdings and think if there are any disruptive technologies out there that might invite a disaster. Closely connected with disruptive technologies is the old concept of "moats." For example, I learned from Warren Buffett that the railroads a) have relative geographic monopolies; and, b) have huge moats.

Fossil fuel pipelines (crude oil and natural gas) also fall into the category of entities with huge moats.

But back to the Hertz story. From the article, data points:

• too many passenger cars, instead of the SUVs that customers want
• lower resale values on passenger cars vs SUVs
• the company cited increased spending as another reason for the poor performance
• it was noted that the company felt an increased presence from activist Carl Icahn whose allies hold several board seats
• wow: a net loss of $1.61/share compared with a net loss of 79 cents a share during the same period a year ago
• EPS: a net loss of $1.61 vs 90 cents forecast -- wow!

It looks like much of their problem has to do with a flood of used vehicles coming off their leases, which reduced used-car prices:

Ms. Marinello on an investor call Tuesday blamed the poor quarter on Hertz’s optimistic views on its fleet, which resulted in the company buying too many cars to prepare for the summer selling season.

Now, the company has too many cars it can’t sell that are depreciating more than expected. Ms. Marinello expects Hertz will have an optimal mix of trucks and SUVs by the end of June.

By the way, this problem was noted on the blog a year or so ago. Some analyst noted that. I didn't buy into at the time; I was wrong. Fortunately I have / had no investments in car rental companies, at least not directly.

Nothing was mentioned in the article about Uber and Lyft, surprisingly. According to Jim Cramer on CNBC Hertz has consistently denied any concern with regard to Uber and Lyft.

How interesting to find this article in The Los Angeles Times, December 13, 2016: "Feeling the squeeze of Uber and Lyft, Herts looks to start-up Shift to sell its used cars." From the story, which is fascinating, by the way:

Rental car companies are looking for additional revenue opportunities as they find themselves squeezed by a major shift in how travelers get around. For many people, the affordability and convenience of Uber, Lyft and other ride-hailing apps have pushed rental cars aside. 

Ride-hailing services overtook rental cars among American professionals for the first time in the fourth quarter of last year, according to travel and expense management software firm Certify. 

Since July 1, Hertz’s stock has plummeted 48%, ending the day Monday at $22.73. In June, Hertz signed a deal to provide rentals to Uber and Lyft drivers who don’t have cars.

And more:

Yelp reported earnings today, after the market closed. And the shares in Yelp immediately plunged almost 30%:

Why?  I can think of a lot of reasons, but the "talking heads" suggest that Uber and Lyft are actually "taking over" in this arena. Yelp is a one-trick pony. Uber and Lyft have a stable of stallions, apparently.

Read more here: http://www.star-telegram.com/news/business/aviation/sky-talk-blog/article148659799.html#storylink=cpy