Ridesharing stocks fared well Tuesday after industry trailblazer Uber Technologies, Inc. (UBER) said that it could deliver its first-ever adjusted profit in the third quarter amid surging food orders and a recovery in ride bookings. Previously, the company indicated that it wouldn't reach this milestone until the fourth quarter.

Key Takeaways

  • Uber said that it could report its first-ever adjusted profit in the third quarter—a quarter earlier than expected.
  • Uber shares staged a decisive volume-backed breakout above the 50-day simple moving average and a six-month trendline, increasing the likelihood of follow-through buying in the coming days.
  • Lyft shares broke out above the top trendline of a descending channel, opening the door for additional short- to mid-term gains.

Both Uber and its smaller rival Lyft, Inc. (LYFT) have taken a hit during the pandemic, facing driver shortages and lackluster demand as would-be customers worked and studied from home. Therefore, a quicker-than-expected move to profitability for both operators has caught many investors by surprise, creating a potential buying opportunity. Below, we take a closer look at each stock and analyze the charts to identify possible trading plays.

Uber Technologies, Inc. (UBER)

According to an SEC filing lodged Tuesday, the ridesharing giant forecasts between a loss of $25 million and profit of $25 million in the third quarter, a significant improvement from its earlier expectation of a $100 million loss. Moreover, the company expects third quarter gross bookings of between $22.8 billion and $23.2 billion, up from its prior guidance range of $22 billion to $24 billion.

"Thanks to the team's tireless work, we've not only grown our global leadership across both Mobility and Delivery; we've done so more profitably than ever before," said CEO Dara Khosrowshahi. "As a result, Uber is reaching an important milestone," he added, hinting at the company's first-ever quarterly profit. Through Tuesday's close, Uber stock trades 13% lower since the start of the year and has tumbled nearly 10% since late June.

The share price staged a strong volume-backed breakout yesterday above the 50-day simple moving average (SMA) and a six-month trendline, increasing the likelihood of follow-through buying in the coming days. Active traders hoping to capitalize on the bullish momentum should look for a potential move to $51.80—an area on the chart where the price finds a confluence of resistance from a long-term horizontal line and the 200-day SMA. Guard against a downside reversal by placing a stop-loss order just beneath Tuesday's low at $42.18.

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

TradingView.com

A horizontal line is often drawn on a price chart to highlight areas of support or resistance.

Lyft, Inc. (LYFT)

The app-based rideshare and transport hire giant posted its first-ever quarter in the green, generating a second quarter adjusted profit of $23.8 million on the back of surging demand for its ride-hailing business and cost-cutting measures that it implemented last year. Furthermore, revenues of $765 million jumped 125% from a year earlier and easily topped the Wall Street consensus at $696 million.

"We had a great quarter. We beat our outlook across every metric, and we have growing momentum," CEO Logan Green said in a statement accompanying the results. As of Sept. 22, 2021, Lyft stock has a market capitalization of $17.78 billion and is trading almost 11% higher on the year. However, the shares have fallen 7.81% over the past three months.

Lyft shares broke out above the top trendline of a descending channel yesterday, opening the door for additional short- to mid-term gains despite the price closing just below the 200-day SMA. Those who buy here should consider scaling out at key overhead resistance levels near $62.50 and $67.50, with a stop positioned under the Sept. 20 low at $50.30.

Chart depicting the share price of Lyft, Inc. (LYFT)

TradingView.com

A descending channel is drawn by connecting the lower highs and lower lows of a security's price with parallel trendlines to show a downward trend

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