Time for Uber-Lyft ETFs After Tesla's Unimpressive Robotaxi Event?

Shares of Uber UBER and Lyft LYFT surged on Oct. 11, 2024, following Tesla’s TSLA not-so-exciting robotaxi event, which failed to meet expectations, raising concerns among ridesharing investors. Uber shares jumped 10.8% on that day, LYFT stock jumped 9.6%, while Tesla shares slumped 8.8%.

Tesla’s robotaxi service is comparable to the taxi services offered by Uber and Lyft. A robotaxi is a self-driving car that operates as a taxi in an e-hailing service, and passengers can request them via a smartphone application. Tesla’s much-anticipated unveiling of robotaxi lacked some crucial details about the potential ridesharing app. This boosted Uber's stock to an all-time high.

Tesla's Robotaxi Event Falls Short of Expectations

On Oct. 10, 2024, Tesla introduced its CyberCab, an autonomous vehicle designed for ridesharing, along with a 20-seater "RoboVan." Tesla CEO Elon Musk claimed that the CyberCab would be priced under $30,000 and envisioned individuals operating fleets of these vehicles as an alternative to Uber and Lyft. Despite this, analysts were underwhelmed by the lack of exact details regarding Tesla’s plans to launch a ridesharing platform.

Is Uber Stock a Buy?

Jefferies analysts described the CyberCab as "toothless," calling the event a "best-case outcome for Uber." They noted Tesla failed to provide "verifiable evidence of progress" on autonomous vehicle technology, reinforcing their belief that Uber is well-positioned to support the growth of autonomous vehicle developers. They maintained a "buy" rating on Uber’s stock, as quoted on Investopedia.

Bank of America analysts, too, echoed similar sentiments, per the above-mentioned source. Uber stock has a Zacks Rank #2 (Buy). Meanwhile, Lyft shares have a Zacks Rank #3 (Hold). Jefferies analysts highlighted that Uber is "uniquely well-positioned" to form partnerships with autonomous vehicle developers, offering advantages such as fleet management, pricing optimization, and regulatory navigation. Citi analysts also expressed optimism for Uber, as quoted on Investopedia.

Should You Ride On Uber & Lyft Shares Via the ETF Route?

There are a few exchange-traded funds (ETFs) that are heavy on Uber shares. These areiShares US Transportation ETF IYT (19% weight), Franklin Disruptive Commerce ETF BUYZ (about 7% weight) and Amplify Travel Tech ETF AWAY (4% weight each in Uber and Lyft). Trenchless Fund ETF RVER is heavily weighted on Lyft shares (weight roams around 14%).

Investors should note that the ETF or basket approach always minimizes company-specific risks. With Uber shares roaming around at an all-time high, many may be cautious about these shares’ ability to surge further. In such a scenario, the ETF route appears to be more balanced and contains lesser risks.

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