We’ve been waiting for a long time and with great anticipation for Lyft to finally file for an IPO. And, boy, the ridehailing giant did not disappoint.
According to documents filed with the Securities and Exchange Commission, Lyft’s financial performance has surpassed our general expectations regarding growth and, perhaps more surprisingly, pathway to profitability.
The company said it generated $2.16 billion in revenue last year, which represents a compound annual growth rate (CAGR) of 151 percent since 2016. Moreover, Lyft has controlled costs better than we expected with a mild CAGR of 16 percent over the same period.
Based on this data, we are boosting our valuation estimates for Lyft. Assuming similar growth into 2019 and high-single-digit forward revenue multiple, valuation could exceed $30 billion. Most estimates peg the company between $20 billion to $25 billion.
That Lyft has been able to grow revenue faster than it loses money is noteworthy. For one thing, Lyft has been much less aggressive than rival Uber in growing and diversifying the top line. Lyft has not ventured into freight and food delivery, which has been a strong business for Uber. While Uber is looking to grow overseas, Lyft has been content with the United States and few locations in Canada.
And Lyft and Uber have engaged in an all-out (and expensive) battle for market share throughout the United States, spending billions of dollars to lure drivers and customers with financial incentives, promotions, and marketing.
Perhaps Lyft’s strategy to remain a pure play transportation-as-a-service company centered on the United States has given it the discipline to ring the most efficiencies out of its core business. By 2016, Lyft was only spending $5 — $10 per new user it acquired, according to a report by CB Insights.
At the same time, Lyft has been winning more revenue per customer. In its filing, the company said it generated $36.04 per active user in the fourth quarter last year, compared to $14.11 in the second quarter of 2016.
“We are laser-focused on revolutionizing transportation and continue to lead the market in innovation,” Lyft said in its S-1 filing. “We believe there is a massive opportunity for us to improve the lives of our riders by connecting them to more affordable and convenient transportation options.”
The big question is whether Lyft owes its growth to taking market share away from Uber. (The company is also reportedly going public this year).
“Lyft, does pose a threat to Uber,” the report said. “Lyft has proven it can grow in the commoditized ride-hailing space just as steadily as Uber — in 2018, it actually grew faster. At the same time, it sends a signal to investors that Uber’s moat may not be as wide as once thought.”
However, the evidence suggests that while the U.S. market is slowing, there’s still plenty of room to grow for both companies.
“Even with about 15 percent of the U.S. population between them, Uber and Lyft continue to expand, picking up more customers month-over-month,” CB Insights said.
In some ways, Lyft doesn’t even see Uber as the primary competition but rather car ownership in general.
“In the United States alone, consumer expenditures on transportation were approximately $1.2 trillion in 2017,” the company said in its filing. “We believe that Lyft currently addresses a significant portion of this massive market, and we intend to further extend our offerings to capture more of this opportunity in the future.”
Significant revenue growth: Lyft generated nearly $2.2 billion last year, compared to $343.3 million in 2016. That represents a compound annual growth rate (CAGR) of 151 percent.
Losses slowing: Lyft’s losses are growing at a significantly slower rate compared to revenue-- about 16 percent CAGR over the past three years.
Margins improving quickly: The company’s operating costs are now less than half of what they were in 2016 in terms of percentage of revenue.
Market share growing: Lyft now controls about nearly 40 percent of the U.S. market, compared to 22 percent at the end of 2016.
Profits still elusive: Lyft said it lost $910.6 million last year, compared to loss of $682.8 million in 2016
Small geographic footprint: The company still operates primarily in the United States and a few cities in Canada. Lyft has no presence in Asia, which we believes represents a significant portion of the future of the global ridesharing industry.
Less diversified offerings: Lyft is betting it all on transportation. In addition to ridehailing, the company has invested in scooters and bikes. Meanwhile, Uber is rapidly expanding into food delivery, logistics, and e-commerce.
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