Ride-sharing companies Lyft, Inc. (LYFT) and Uber Technologies, Inc. (UBER) initially went their separate ways after mixed earnings reports last week, with Lyft stock closing higher in a 3.0% rally while Uber stocck sold off nearly 7%. The two disruptors have fallen in lockstep since that time, posting multi-month lows that have trapped complacent shareholders. More ominously, Uber is now testing May's all-time low and could break support, dropping into unknown territory.

Lyft's minor strength has come at a cost, with the company updating its Terms of Service (TOS) to include hidden fees designed to increase income. As we learned from Netflix, Inc.'s (NFLX) botched price hike, consumers will resist these efforts, especially when there's competition or alternatives. In this case, Lyft faces two challenges. First, "sneaky" fees undermine brand loyalty, encouraging customers to open Uber accounts, and second, there’s a price where customers will forgo the ride-sharing services entirely and just drive themselves.

The hike has also forced a game of arbitrage in which customers poll both services, looking for the cheapest rate before picking a driver. Cost variations can be staggering, adding to mistrust. For example, the undersigned was quoted over $17 for a six-mile Lyft trip to a college campus on a Tuesday, much higher than the typical $8 or $9 quote, while Uber offered the same trip for less than $10. Worse yet, the driver posted both Uber and Lyft tags during pick-up.

In addition, these hard-working folks are making ends meet with three, four, or five other delivery or pick-up services, all of which carry different cost structures. This splintered approach is unsustainable in the long term, highlighting the need for industry consolidation. Unfortunately, this is a slippery slope because Alphabet Inc. (GOOGL) owns shares of both companies as well as the self-driving technology company Waymo and could eventually build a ride-sharing monopoly that hurts consumers.

LYFT Daily Chart

Daily chart showing the share price performance of Lyft, Inc. (LYFT)

Lyft came public in the upper $80s in March 2019 and dropped like a rock in an Elliott five-wave decline that posted an all-time low at $47.17 in May. The subsequent recovery wave reversed at the 50% sell-off retracement level in July, generating a two-legged decline that has now reached the lowest low since June 3. Volume is holding up better than price into August, with the on-balance volume (OBV) accumulation-distribution indicator at a four-month high.

Fibonacci levels offer the most useful feedback at this juncture, with the decline now reaching the alignment between the .618 rally retracement and .214 sell-off retracement in the mid-$50s. The stock could make a bullish stand right here, similar to bounces in April and May, On the flip side, Lyft stock is likely to test the all-time low if this price zone breaks, especially if Uber breaks down in the coming sessions.

UBER Daily Chart

Chart showing the share price performance of Uber Technologies, Inc. (UBER)

Uber came public to great fanfare in May, opening in the low $40s and closing the session near that level, despite a four-point intraday range. It hit an all-time low at $36.08 the following day and turned higher into late June, posting an all-time high at $47.08. A five-point trading range broke to the downside in July, finding support in the upper $30s a few days later. The stock gapped up after Lyft earnings and gapped down the next day, leaving behind a bearish abandoned baby candlestick. 

Monday's wide-range decline ended within a point of the deep May low, setting up a critical test that could determine the stock's fate well into the fourth quarter. Unfortunately for shareholders, OBV has carved a more bearish pattern than Lyft, opening the door to a breakdown that could reach the $20s, possibly fueling takeover speculation that is likely to get Alphabet's undivided attention.

The Bottom Line

Ride-sharing services stocks are in full retreat after mixed earnings reports and could hit all-time lows in the coming weeks.

Disclosure: The author held no positions in the aforementioned securities at the time of publication.