A ride-share price war is brewing, and it could mean bad news for Lyft

Lyft Inc. and Uber Technologies Inc. may be in the early stages of a price war, and investors in money-losing Lyft especially need to be prepared.

Whereas Uber

just posted a quarterly GAAP profit and has enjoyed a soaring stock price this year, Lyft

still has work to do as it tries to stand out in the eyes of the investment community — and apparently with riders too.

Lyft’s new chief executive, David Risher, told analysts on Tuesday’s earnings call that the company is focused on differentiating itself. One of those ways could be by getting rid of surge pricing, or higher prices during primetime usage.

“That’s a bad form of price-raising. It’s a particularly bad for us because riders hate it with a fiery passion,” Risher said. “And so we’re trying to really get rid of it. And because we’ve got such good driver supply, which we’ve worked really hard to get, it’s decreased significantly.”

Read: New Lyft CEO’s ‘unusual’ pay structure is a ‘sign of the times’

He said Lyft’s share of rides affected by prime-time pricing was down 35% in the second quarter from the first quarter. “So that has a revenue implication, right? We’re actually taking less money. But it’s good for our riders, and it’s good for our overall market ourselves,” Risher said.

Whether the trend is good enough for Wall Street remains to be seen, however. Lyft shares were down more than 6% in choppy after-hours trading Tuesday following the latest report, which contained results that were pretty much in line with Wall Street’s expectations, as summer travel and rides to the office helped increase demand.

The trend toward lower pricing by Lyft had already caught Wall Street’s eye before the company faced investors. In a preview note ahead of earnings, Brian White, an analyst at Monness Crespi & Hardt, said that he’d spotted “a meaningful improvement in Lyft’s value proposition, driven by more competitive pricing” since April.

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On the earnings call, some analysts indicated concerns about the pricing trend, asking how else Lyft was differentiating itself versus larger rival Uber. Risher said that Lyft has rolled out features like “wait and save” — where riders wait longer for a ride but pay less — and is also focusing on non-emergency health-care rides, which grew 40% in the second quarter.

Nonetheless, investors should pay close attention to Lyft’s change of tune on pricing. Its profitable rival may be better prepared for a price war, and Lyft may not fare as well.

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