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This tweet demonstrates a lack of basic finance knowledge. Stock prices are based on ==future== cash flows, not past. It's already a huge company still growing
by pbreit 7y ago
This tweet demonstrates a lack of basic finance knowledge. Stock prices are based on ==future== cash flows, not past. It's already a huge company still growing very fast and printing money on core product (non-pool rides in mature markets)(even overall contribution margin was a whopping 50%! And growing!).
- mifeng 7y agoStock prices are based on the present value of future profits, so pointing out that Lyft is unlikely to be profitable for a long time is spot-on.
- pbreit 7y agoIt could be massively profitable tomorrow.
- aetherson 7y agoFor values of "could" that include "definitely will not be."
- pbreit 7y ago"Tomorrow" was facetious, I apologize. But based on existing 50% contribution margins it's quite clear it could achieve earnings in the near term. But of course with such contribution margins and growth rates it would be silly to hang on to cash.
- rogers65 7y agoThe idea that Lyft will not close the gap of its administrative expenses is unlikely. Especially if Uber is operating at a lower administrative cost.
- smaug7 7y agoHi Mike!
- mbesto 7y agoSince we're all being pedantic here... stock prices are based on the value in which investors place bids on the equity value per share of the company. Investors typically value that number on the present value of expected future profits, but like all complex systems, it's never that simple. pbreit is also potentially correct - software companies have the capability of producing massive windfall cashflows (and therefore profits) and hence why the market cap is so high. What isn't being talked about is that a path to profitability isn't clear. All of us armchair financial analysts don't have any insight into: - What are the unit economics of a car ride and what elasticity of pricing is there in the market? - Is the fundamental thesis of future value all based on self-driving cars? - Once particular markets mature, what operating expenses can effectively be "turned off"? Has the company already proven this in their mature markets? Personally I think uber and lyft are doomed as companies and will go the way of Groupon, but deriving that analysis by reading quarterly financial statements on net income is a fool's errand. PS - And yes the parent commenter clearly lacks basic public market equity acumen as $775M was a quarterly revenue...smh
- acchow 7y agoI agree, valuation is forward looking. But I just wanted to point out how risky Lyft is compared to Uber. In some sense, Lyft is selling $1.67 for $1. But Uber is selling $1.18 for $1, which seems way easier to recoup and become profitable quite quickly. I excluded R&D because I just wanted to focus on "selling $1.67 for $1". I excluded the other expenses because that's just financial structure which isn't relevant to this picture either.
- deleted 7y ago[deleted]
- Sujan 7y agoWhat tweet are you referring to?