On the surface, Lyft’s growth prospects appear more limited than rival Uber. While Uber has aggressively expanded into new services and geographic markets, Lyft has remained steadfast in providing ridesharing services in the United States, expanding into Canada only last year.
But Lyft still has plenty room to grow. As the company prepares to go public this week, here are three reasons why Lyft could be on the upswing.
Home sweet home Despite Lyft generating a 153 percent compound annual growth rate (CAGR) increase in revenue since 2016, Statista estimates the U.S. rideshare market penetration will hit just 15 percent in 2019. After adjustments for age and proportion of the population in urban areas, we consider an estimate closer to 35 percent to be more appropriate. Either way, we are a long way from achieving market saturation. Lyft should be able to benefit from its historical focus on serving this market. And Lyft has barely scratched the surface in Canada.
Not just cars Lyft has strategically expanded into bike and scooter-sharing, two markets estimated to be growing at a faster rate than ridesharing. Lyft has made tactical moves that will give it a strong strategic advantage as these mobility industries continue to grow. Most notably, the company acquired Motivate, the largest bike sharing platform in the United States. Motivate operates bike-sharing systems across the country, including Ford’s GoBike in San Francisco, Citi Bike in New York, and Capital Bikeshare in Washington, D.C. According to Lyft’s S-1 prospectus, 76 percent of bike share trips in 2017 were taken on Motivate systems.
Autonomous vehicles Lyft has heavily invested in self driving vehicles. Specifically, the company is developing its own technology platform which allows partners to offer autonomous vehicles on the Lyft network. Aptiv, one of Lyft’s major partners, is testing vehicles in Las Vegas and completed 35,000 autonomous rides on the Lyft platform last year.
Of course, there are plenty of risks to consider. If the ridesharing market is closer to saturation than we believe, growth in its core business could be limited. Bike and scooter-sharing companies have had their troubles in the past, including disagreements with city regulators. Autonomous vehicle technology is still new and untested.
Nevertheless, we think Lyft has a compelling growth story and we think investors will agree with us when the company goes public Friday.
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