Ride-sharing giant Uber Technologies (NYSE:UBER) has just entered the market for eco-conscious ride sharing. That puts the company in Facedrive’s (TSXV:FD) turf. If the competition heats up, Facedrive stock could face a historic challenge.
Here’s what you need to know.
Uber made massive announcements about improving sustainability across its global fleet yesterday. CEO Dara Khosrowshahi said the company would be investing US$800 million (CA$1.05 billion) to ensure its entire fleet was electric by 2030.
However, the platform is also making immediate changes. Khosrowshahi announced the launch of Uber Green — a new feature on the app that allows riders to select electric or hybrid vehicles for their ride by paying US$1 extra. This feature is being rolled out immediately to 15 cities across Canada and the U.S.
“By the end of the year, Uber Green will be available in more than 65 cities globally,” Khosrowshahi said in a tweet yesterday.
This move puts Uber in Facedrive’s turf. The Canadian startup was trying to differentiate itself from all the other ride-sharing apps by offering unique incentives linked to each ride’s carbon footprint. With Uber Green, this unique selling point is under siege.
Despite this news, Facedrive stock is up 5.2% this morning. The company’s valuation remains above $1.36 billion, cementing its position as a Canadian tech unicorn.
Facedrive stock moat
Investors bullish on Facedrive stock could argue that the company’s competitive advantage isn’t the app’s features but the network of drivers. Electric and hybrid vehicles are still rare on North American streets.
Facedrive has been working on creating an exclusively green fleet across Canada for years. Now, this network of drivers and their eco-friendly cars is big enough to set the platform apart.
While these network effects put a floor on Facedrive’s stock, it could also make the company an acquisition target for larger firms. Uber, for example, could decide it’s easier to acquire and integrate Facedrive rather than seek out EV and hybrid drivers themselves. Uber’s rivals across the world could also target the company to compete on this feature.
An acquisition would unlock tremendous value for long-term shareholders. Facedrive stock is already up 521% since the start of this year. A multi-billion-dollar buyout could deliver stunning returns relatively shortly.
The recent launch of Uber Green creates a threat and unlocks opportunities. Uber is the 800-pound gorilla in global ride sharing, but Facedrive managed to differentiate itself by offering users an option to reduce their carbon footprint with every ride.
Now that Uber has entered Facedrive’s market, it could end Facedrive stock’s meteoric rise. However, the startup remains an attractive acquisition target for larger ride-sharing firms. We cannot rule out a buyout by Uber or one of its rivals in the near future.
However, speculating about a buyout is risky. Investors may want to tread carefully and keep an eye on the company to see if their competitive advantage is resilient enough. If you haven’t invested in the company yet, perhaps it’s best to wait and watch. If you’re already an investor, it could make sense to hold for a big exit.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Fool contributor Vishesh Raisinghani has no position in any of the stocks mentioned. The Motley Fool recommends Uber Technologies.