Analyst: Taxi Medallions No ‘Safe haven’ in Wake of Uber

February 24, 2015

Uber, the popular ride-hailing app, is hitting taxicabs where it hurts: The medallion business.

Taxi companies make money by charging drivers for medallions, or licenses to drive their cabs.

In a note to investors last week, Jefferies analyst Sean Darby said taxi medallions are not the “safe haven” in terms of investing that they used to be as taxi companies face increasing competition from Uber and similar services.

“After many years of rising prices due to limited supply, the average price of a single (New York City) taxi medallion fell around 20 percent from their peak in 2013” because of the growing popularity of Uber and other car-hailing apps, he wrote. He said the situation is similar in Boston and Chicago.

He said it might be time to bet against taxi medallions in 2015.

But the CFO of Medallion Financial Corp., which specializes in offering loans to buy the medallions, touted the taxi industry’s advantages.

The taxi industry “continues to retain its favored position with the riding public,” Larry Hall said on Feb. 17, in a statement containing Medallion Financial’s fourth-quarter results.

“Regulated medallion taxis are preferred for their fast, safe, and reliable service, insured vehicles, licensed drivers, and metered pricing that is consistent at all times of the day,” Hall said.

Uber, valued at $40 billion, is dealing with legal and regulatory challenges, concerns about rider safety and the screening of its drivers, and criticism of how it has raised prices during storms and other high-demand periods.

Medallion Financial’s fourth-quarter net income rose 22 percent to $8.1 million, as the New York-based company said it continues to diversify its business outside of medallion loans. It had portfolio growth in New York, Boston and Newark, but declines in Chicago and other markets.

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Latest Comments

  • February 24, 2015 at 2:47 pm
    Zach says:
    Rob, I think you're looking at the situation incorrectly. Step back. Think about the future. Society will always seek whatever is cheaper and more efficient - a primary econom... read more
  • February 24, 2015 at 2:18 pm
    Rob says:
    Uber is an illegal law-breaking TAXICAB operation. It's not (just) an app. App is an excuse that Uber uses to evade laws and regulations followed by others. What legal small b... read more
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