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Sadly for Lyft I think the best comparison will be Snap. And just one look at the SNAP chart will tell you why you should avoid the Lyft IPO. It will go public

Sadly for Lyft I think the best comparison will be Snap. And just one look at the SNAP chart will tell you why you should avoid the Lyft IPO. It will go public at an inflated price and hold that valuation for a quarter or two and then people will start asking where either the profits or growth are and Lyft will need to start growing or erasing their huge operating losses right at the same time Uber is trying to grab as much ride share as possible gearing up to their own IPO. So at a time when the market will be starting to really pressure them to cut losses, probably by cutting the driver's portion of revenue and raising prices, Uber will be trying their best to inflate their own ride share metrics by giving drivers more and cutting ride costs. What is the story you can tell that paints Lyft as a good investment over the next 2 year period? Then there is Lyft's dual share structure will get it kicked out of many ETF's. This locked in money is a godsend to most companies as they help buoy the stock price by having locked in holders of teh stock during turbulent times. I think MSCI will put Lyft into some of its indexes given that it just put in 8-10 Chinese companies with dual listing share structures One thing I do like in Lyft's favour is that they could be a counter cyclical stock, ie they do well when the rest of the market isn't, due to people using Lyft to replace a second car or a lease that they've given up. We just haven't had a recession while ride sharing was a main stream thing. > Zimmer, Lyft's cofounder, went on to assert that private car ownership would “all but end in major U.S. cities” by 2025. Given that people are currently signing leases and payment plans for cars that won't expire by then I'd say this is a bit of a stretch:)

malandrew 8y ago
The US hasn't had a recession while ride sharing was a mainstream thing, but other markets have.
- pishpash 8y ago
  Car ownership will be cheaper during a recession. Driver pay can't go much lower, especially with various social proposals being put on the table for 2020.
ddingus 8y ago
He is way early. Functional, competent self driving cars are not here yet. As we get closer, I think we will find few will want to own them. Why bother? There are reasons, but those are few compared to those readons for cars we drive ourselves. We are likely to find, people will question the number of cars and share them a lot more. But that state is still a very long way off. The current slump in sales is both economic (way too many Americans buying used because new is not worth it, given tepid income) ...and a wait for EV cars to really arrive at price points worth buying new. Looks like private car ownership is on the wane, but not really, not yet. My .02
- jdsully 8y ago
  Physics says if I don’t have my own car I’ll have to wait for one. The rideshare could leave a ton in the parking lot but that negates all the projected cost savings from higher utilization.
  - ddingus 8y ago
    In most cases, having your own car will mean driving it too. I have been asking people about this. Many will just build the wait into what they do, and will count on software minimizing that with predictive behavior. Personally, I have zero desire to own a self driving car. I could potentially own one with that option, but the expense will get in the way. Just not worth it. Younger people will just adapt, meaning longer term ownership trends will not be good. Except for classic, you drive cars. Demand and value will grow nicely as people maintain them. Frankly, they will have to be legislated off the road. Well off people will own, but that will be a minority case.
    - jdsully 8y ago
      Most people like leaving crap in their car and having it ready at a moments notice. I definitely think people will want self driving cars - but as a feature in the car they buy. The exception will be those in the city where it’s a pain to find parking.
gautamdivgi 8y ago
I think the rush of IPO's may be because of some economic clouds on the horizon. Investors are probably looking to cash out while the going is good.
- bfrog 8y ago
  It's a game of hot potato, last one holding is the sucker
- linuxftw 8y ago
  It's a leading indication of recession, as is mergers and acquisitions. Easy money (credit) dries up at the end of the business cycle, companies can no longer raise capital in private markets (or traditionally, through debt), go seek money from the markets. Similarly, large companies cannot grow revenue because there are fewer startup businesses/businesses are not expanding, and to grow revenue they buy other companies.
leesec 8y ago
Yeah except Snap didn't have nearly the revenue stream that Lyft does. I'm still not sure what Snap's main source of revenue is, but Lyft clearly has tons of revenue pouring in and you'd think they'd be able to dial back their rapid expansion at some point to become profitable.
- bduerst 8y ago
  Not to mention Lyft's revenue is growing fairly quickly, faster than their operating expenses. The GP's comment here is why it may be selling at a discount at IPO and then go up once it turns a profit and people like GP jump in. The cash injection can definitely help secure the revenue growth too.
  - linuxftw 8y ago
    Even if they ever turn a profit (which is unlikely if they continue down the 'we're a self driving car company!' road), that doesn't make them a good investment. There are plenty of actually profitable companies that return decent dividends. There's no proof that profitability will result in an increase in share price. If they're not profitable today, I don't think they'll ever be profitable. It's a signal from the marketplace that 'on demand ride services' business segment is over saturated for market demand. They are not meeting an unfulfilled niche in the market, they are losing money to trying to become a dominant player. Unless the landscape drastically changes and people no longer actually have their own cars (which is their near-term pipe dream), they're going to lose a bunch of other people's money.
    - bduerst 8y ago
      A company that is not profitable now that is going to make a profit down the road is a good investment, since you'll be buying it at a discount on the market now. Why not also just hand wave that Lyft is a mere messaging app company that provides communication between people who need rides and drivers willing to give them? You can criticize the company many ways, but whatever they're doing is working because they're making $2.2B in revenue and growing rapidly. They're positioning themselves as a demand-provider to service the upcoming self driving markets, which is smarter than vertically integrating like some other hype machines out there.
fullshark 8y ago
> What is the story you can tell that paints Lyft as a good investment over the next 2 year period? There's only one: it gets acquired
notyourwork 8y ago
> Given that people are currently signing leases and payment plans for cars that won't expire by then I'd say this is a bit of a stretch:) Anyone who is signing up for payment plans that stretch 6 years is crazy and buying a vehicle beyond their means.
- deleted 8y ago
  [deleted]
- rootusrootus 8y ago
  Or getting the money for cheap. At sub-2% interest I will take as much money as you're willing to lend me.
  - notyourwork 8y ago
    I'm going to guess you are an outlier in the demographic of consumers getting 6+ year car loans.
  - umeshunni 8y ago
    +1 - I got a 6 year car loan from my CU a couple of years back for next to nothing and at this point, my savings account at the same back has a 2x higher interest rate.
- thatfunkymunki 8y ago
  I got a 0% loan for a 6 year term on a new car in mid 2016. I think it was a great idea, effectively was given a discount on the car on top of the negotiated price at that rate.
  - kazinator 8y ago
    You think, but anyone who walked into that dealership with cash would have gotten a better deal on exactly the same car, and so would someone who goes for non-zero-% financing. There is no free lunch; you're not going to get a better financed deal than someone who pays and waves goodbye. There is no 0% financing without a catch.
esturk 8y ago
I don't consider car leasing to be car ownership. It's like saying leasing a house is home ownership. With that said, car leasing is on the rise. https://www.fool.com/investing/2018/06/08/why-rising-car-leases-should-worry-automakers.aspx https://www.fool.com/investing/2018/06/08/why-rising-car-lea... So Zimmer's prediction is still at play here.
- ghaff 8y ago
  Leasing is just a financing model that may have implications for how assets are carried on a balance sheet.
sp332 8y ago
Snap had a good product and plenty of customers but was crushed by Facebook. What competitor will tower over Lyft like that?
- chollida1 8y ago
  > Snap had a good product and plenty of customers but was crushed by Facebook. What competitor will tower over Lyft like that? Well Lyft ha a good product and plenty of customers and is currently being crushed in terms of market share. Wait till you hear about this company call Uber. They are 5x the size of Lyft and are capable of outspending Lfyt until Lyft is bankrupt.
- deleted 8y ago
  [deleted]
rb808 8y ago
That would just mean its a zombie company that's going down sooner or later. If making it public makes it fail quicker, that is good thing. Keeping it out of the light and pretending its a good company just prolongs the inevitable.
temporalparts 8y ago
An investment thesis for Lyft is if you expect Lyft to get acquired. If profitability is nowhere in sight, then the end-game is acquisition. Companies that might want to get into ridesharing is long, and Lyft is the fastest (and probably cheapest if the stock tanks) path towards competing against Uber in the US market. Any company that is working on self-driving cars will want to acquire Lyft: Google, Apple, Tesla, GM, etc Any company that is in logistics space will want to acquire Lyft: Amazon, DoorDash, Grubhub, etc. Any ridesharing company will want to acquire Lyft: Uber (defensively), Didi, Ola, probably not Grab, etc. There will likely be a bidding war for Lyft because that's the only reasonable path towards competing against Uber unless you think self-driving car is < 5 years away.
- mrnobody_67 8y ago
  Why in the world would someone doing self driving cars want to acquire them? Self driving car companies be able to offer competing service for 70% cheaper per mile. Riders will migrate for the drastically better price. There's no long-term defensible asset in the Lyft driver network, and switching costs for riders are minimal.
  - pgt 8y ago
    A customer base has value. Consider that Google bought YouTube for $1.65bn. There is little doubt that Google could build the necessary video streaming tech, but they still bought YouTube, and it was their best acquisition to-date.
    - whymauri 8y ago
      I thought YouTube is still not profitable? Like it provides a lot of value for their larger, long scale strategy but is bleeding money short term? I'm no expert, I just see this narrative parroted all the time.
      - SatvikBeri 8y ago
        As far as I can tell, Google hasn't disclosed whether YouTube is profitable. What we know is that most analysts predict YouTube makes ~$10BN in revenue, is growing 30%-40% per year, and is valued at somewhere between $75BN-$150BN (much more than Google paid for it.) But those are just analyst predictions, it's very hard to tell when Google's not saying anything.
benatkin 8y ago
On Facebook this morning, I was shown an ad from a page called "Uber Assault", which was about a (potential) lawsuit over riders being assaulted, and there were a bunch of people chiming in that they didn't feel safe being Lyft/Uber drivers so they quit. It seems that perhaps drivers are more at risk than riders because even though the approval process for becoming a rideshare driver is very weak, it's much weaker for becoming a rider. Either way, people who had a bad experience were likely to avoid using it. I don't think Uber/Lyft is going to replace car ownership anytime soon, maybe for the six foot tall man like me but not for everybody. Another problem is waiting for a car. I got robbed once while waiting for an Uber. One solution might be to wait for the Uber driver to arrive and then go outside. I tried this once the other day, not for safety but so I could hang out with friends. The Uber left less than a minute after I got messaged, and I got charged the $5 fee, so that isn't practical. It feels safer to be walking to a bus or rail stop, or to be waiting at a stop, than it does to be standing on a corner waiting for a car. The idea that Uber/Lyft is going to replace private car ownership for everyone because it's replaced it for some is ludicrous. Public transit has done more to replace it for me (car-free by choice for 5 years) than Uber/Lyft. I usually only use Uber/Lyft when I'm in a hurry, and the cost Uber/Lyft rides just about cancels out the time savings. Self driving cars might one day replace it, but I don't think that Lyft or Uber is going to be at the forefront of it. If they are it will make me more frustrated with how the tech industry operates, because it will show that the value of investment and brand far outweighs expertise. Uber/Lyft contain a tiny fraction of the deep learning, automotive, and transportation expertise that will be needed to pull off such a thing. Finally the term "major cities" brings up the "no true scotsman" fallacy a lot. "Rent is high in major cities." Oh yeah? Dallas isn't a major city? If I don't live in a high rise downtown I'm not really living in Dallas? Eventually every major city will be eliminated in an argument and it will turn out that for the sake of the argument, there aren't any major cities in the world.
asabjorn 8y ago
I agree. In addition to this its main competitor Uber has many other business units (eats, freight, etc) and can reinvest revenue from other countries where it is the leading rideshare provider. The S1 shows that Lyft on the other hand is loosing a significant amount of money on all trips through its position as the second player in all markets its in. How is it supposed to decrease that loss?
hopler 8y ago
"major us city" is quite a weasel term. Manhattan? Queens? SF? San Jose? Phoenix? Austin?

malandrew 8y ago

The US hasn't had a recession while ride sharing was a mainstream thing, but other markets have.

pishpash 8y ago
Car ownership will be cheaper during a recession. Driver pay can't go much lower, especially with various social proposals being put on the table for 2020.

ddingus 8y ago

He is way early. Functional, competent self driving cars are not here yet. As we get closer, I think we will find few will want to own them. Why bother? There are reasons, but those are few compared to those readons for cars we drive ourselves. We are likely to find, people will question the number of cars and share them a lot more. But that state is still a very long way off. The current slump in sales is both economic (way too many Americans buying used because new is not worth it, given tepid income) ...and a wait for EV cars to really arrive at price points worth buying new. Looks like private car ownership is on the wane, but not really, not yet. My .02

jdsully 8y ago
Physics says if I don’t have my own car I’ll have to wait for one. The rideshare could leave a ton in the parking lot but that negates all the projected cost savings from higher utilization.
- ddingus 8y ago
  In most cases, having your own car will mean driving it too. I have been asking people about this. Many will just build the wait into what they do, and will count on software minimizing that with predictive behavior. Personally, I have zero desire to own a self driving car. I could potentially own one with that option, but the expense will get in the way. Just not worth it. Younger people will just adapt, meaning longer term ownership trends will not be good. Except for classic, you drive cars. Demand and value will grow nicely as people maintain them. Frankly, they will have to be legislated off the road. Well off people will own, but that will be a minority case.
  - jdsully 8y ago
    Most people like leaving crap in their car and having it ready at a moments notice. I definitely think people will want self driving cars - but as a feature in the car they buy. The exception will be those in the city where it’s a pain to find parking.

gautamdivgi 8y ago

I think the rush of IPO's may be because of some economic clouds on the horizon. Investors are probably looking to cash out while the going is good.

bfrog 8y ago
It's a game of hot potato, last one holding is the sucker
linuxftw 8y ago
It's a leading indication of recession, as is mergers and acquisitions. Easy money (credit) dries up at the end of the business cycle, companies can no longer raise capital in private markets (or traditionally, through debt), go seek money from the markets. Similarly, large companies cannot grow revenue because there are fewer startup businesses/businesses are not expanding, and to grow revenue they buy other companies.

leesec 8y ago

Yeah except Snap didn't have nearly the revenue stream that Lyft does. I'm still not sure what Snap's main source of revenue is, but Lyft clearly has tons of revenue pouring in and you'd think they'd be able to dial back their rapid expansion at some point to become profitable.

bduerst 8y ago
Not to mention Lyft's revenue is growing fairly quickly, faster than their operating expenses. The GP's comment here is why it may be selling at a discount at IPO and then go up once it turns a profit and people like GP jump in. The cash injection can definitely help secure the revenue growth too.
- linuxftw 8y ago
  Even if they ever turn a profit (which is unlikely if they continue down the 'we're a self driving car company!' road), that doesn't make them a good investment. There are plenty of actually profitable companies that return decent dividends. There's no proof that profitability will result in an increase in share price. If they're not profitable today, I don't think they'll ever be profitable. It's a signal from the marketplace that 'on demand ride services' business segment is over saturated for market demand. They are not meeting an unfulfilled niche in the market, they are losing money to trying to become a dominant player. Unless the landscape drastically changes and people no longer actually have their own cars (which is their near-term pipe dream), they're going to lose a bunch of other people's money.
  - bduerst 8y ago
    A company that is not profitable now that is going to make a profit down the road is a good investment, since you'll be buying it at a discount on the market now. Why not also just hand wave that Lyft is a mere messaging app company that provides communication between people who need rides and drivers willing to give them? You can criticize the company many ways, but whatever they're doing is working because they're making $2.2B in revenue and growing rapidly. They're positioning themselves as a demand-provider to service the upcoming self driving markets, which is smarter than vertically integrating like some other hype machines out there.

fullshark 8y ago

> What is the story you can tell that paints Lyft as a good investment over the next 2 year period? There's only one: it gets acquired

notyourwork 8y ago

> Given that people are currently signing leases and payment plans for cars that won't expire by then I'd say this is a bit of a stretch:) Anyone who is signing up for payment plans that stretch 6 years is crazy and buying a vehicle beyond their means.

deleted 8y ago
[deleted]
rootusrootus 8y ago
Or getting the money for cheap. At sub-2% interest I will take as much money as you're willing to lend me.
- notyourwork 8y ago
  I'm going to guess you are an outlier in the demographic of consumers getting 6+ year car loans.
- umeshunni 8y ago
  +1 - I got a 6 year car loan from my CU a couple of years back for next to nothing and at this point, my savings account at the same back has a 2x higher interest rate.
thatfunkymunki 8y ago
I got a 0% loan for a 6 year term on a new car in mid 2016. I think it was a great idea, effectively was given a discount on the car on top of the negotiated price at that rate.
- kazinator 8y ago
  You think, but anyone who walked into that dealership with cash would have gotten a better deal on exactly the same car, and so would someone who goes for non-zero-% financing. There is no free lunch; you're not going to get a better financed deal than someone who pays and waves goodbye. There is no 0% financing without a catch.

esturk 8y ago

I don't consider car leasing to be car ownership. It's like saying leasing a house is home ownership. With that said, car leasing is on the rise. https://www.fool.com/investing/2018/06/08/why-rising-car-leases-should-worry-automakers.aspx https://www.fool.com/investing/2018/06/08/why-rising-car-lea... So Zimmer's prediction is still at play here.

ghaff 8y ago
Leasing is just a financing model that may have implications for how assets are carried on a balance sheet.

sp332 8y ago

Snap had a good product and plenty of customers but was crushed by Facebook. What competitor will tower over Lyft like that?

chollida1 8y ago
> Snap had a good product and plenty of customers but was crushed by Facebook. What competitor will tower over Lyft like that? Well Lyft ha a good product and plenty of customers and is currently being crushed in terms of market share. Wait till you hear about this company call Uber. They are 5x the size of Lyft and are capable of outspending Lfyt until Lyft is bankrupt.
deleted 8y ago
[deleted]

rb808 8y ago

That would just mean its a zombie company that's going down sooner or later. If making it public makes it fail quicker, that is good thing. Keeping it out of the light and pretending its a good company just prolongs the inevitable.

temporalparts 8y ago

An investment thesis for Lyft is if you expect Lyft to get acquired. If profitability is nowhere in sight, then the end-game is acquisition. Companies that might want to get into ridesharing is long, and Lyft is the fastest (and probably cheapest if the stock tanks) path towards competing against Uber in the US market. Any company that is working on self-driving cars will want to acquire Lyft: Google, Apple, Tesla, GM, etc Any company that is in logistics space will want to acquire Lyft: Amazon, DoorDash, Grubhub, etc. Any ridesharing company will want to acquire Lyft: Uber (defensively), Didi, Ola, probably not Grab, etc. There will likely be a bidding war for Lyft because that's the only reasonable path towards competing against Uber unless you think self-driving car is < 5 years away.

mrnobody_67 8y ago
Why in the world would someone doing self driving cars want to acquire them? Self driving car companies be able to offer competing service for 70% cheaper per mile. Riders will migrate for the drastically better price. There's no long-term defensible asset in the Lyft driver network, and switching costs for riders are minimal.
- pgt 8y ago
  A customer base has value. Consider that Google bought YouTube for $1.65bn. There is little doubt that Google could build the necessary video streaming tech, but they still bought YouTube, and it was their best acquisition to-date.
  - whymauri 8y ago
    I thought YouTube is still not profitable? Like it provides a lot of value for their larger, long scale strategy but is bleeding money short term? I'm no expert, I just see this narrative parroted all the time.
    - SatvikBeri 8y ago
      As far as I can tell, Google hasn't disclosed whether YouTube is profitable. What we know is that most analysts predict YouTube makes ~$10BN in revenue, is growing 30%-40% per year, and is valued at somewhere between $75BN-$150BN (much more than Google paid for it.) But those are just analyst predictions, it's very hard to tell when Google's not saying anything.

benatkin 8y ago

On Facebook this morning, I was shown an ad from a page called "Uber Assault", which was about a (potential) lawsuit over riders being assaulted, and there were a bunch of people chiming in that they didn't feel safe being Lyft/Uber drivers so they quit. It seems that perhaps drivers are more at risk than riders because even though the approval process for becoming a rideshare driver is very weak, it's much weaker for becoming a rider. Either way, people who had a bad experience were likely to avoid using it. I don't think Uber/Lyft is going to replace car ownership anytime soon, maybe for the six foot tall man like me but not for everybody. Another problem is waiting for a car. I got robbed once while waiting for an Uber. One solution might be to wait for the Uber driver to arrive and then go outside. I tried this once the other day, not for safety but so I could hang out with friends. The Uber left less than a minute after I got messaged, and I got charged the $5 fee, so that isn't practical. It feels safer to be walking to a bus or rail stop, or to be waiting at a stop, than it does to be standing on a corner waiting for a car. The idea that Uber/Lyft is going to replace private car ownership for everyone because it's replaced it for some is ludicrous. Public transit has done more to replace it for me (car-free by choice for 5 years) than Uber/Lyft. I usually only use Uber/Lyft when I'm in a hurry, and the cost Uber/Lyft rides just about cancels out the time savings. Self driving cars might one day replace it, but I don't think that Lyft or Uber is going to be at the forefront of it. If they are it will make me more frustrated with how the tech industry operates, because it will show that the value of investment and brand far outweighs expertise. Uber/Lyft contain a tiny fraction of the deep learning, automotive, and transportation expertise that will be needed to pull off such a thing. Finally the term "major cities" brings up the "no true scotsman" fallacy a lot. "Rent is high in major cities." Oh yeah? Dallas isn't a major city? If I don't live in a high rise downtown I'm not really living in Dallas? Eventually every major city will be eliminated in an argument and it will turn out that for the sake of the argument, there aren't any major cities in the world.

asabjorn 8y ago

I agree. In addition to this its main competitor Uber has many other business units (eats, freight, etc) and can reinvest revenue from other countries where it is the leading rideshare provider. The S1 shows that Lyft on the other hand is loosing a significant amount of money on all trips through its position as the second player in all markets its in. How is it supposed to decrease that loss?

hopler 8y ago

"major us city" is quite a weasel term. Manhattan? Queens? SF? San Jose? Phoenix? Austin?