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Lyft’s Pandemic Challenges Continue, but Business Is Improving

Lyft is starting to rise out of its pandemic-driven slump.
(OpturaDesign)
(OpturaDesign)
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“Lyft’s active riders and revenue improved in the third quarter from the previous three months as coronavirus shutdowns eased in some cities, but business remained sharply down from a year earlier because of the pandemic,” WSJ writes.

Numbers To Consider:

Even as the pandemic continues to weigh on its business, Lyft hopes to become profitable by the end of next year. Company President John Zimmer said he was encouraged by “early test results for a Covid-19 vaccine and a big regulatory win for the company last week.”

The Bottom Line: Zimmer said a potential Covid-19 vaccine “will further accelerate our recovery.” But Lyft, Uber and other companies built on gig-workers scored a significant victory last week when a California ballot measure passed exempting ride-share and food-delivery companies from reclassifying their drivers as employees with benefits.

Justin Oh:

Now that California’s political risk is more-comfortably in the rear-view mirror, I’m starting to consider changing my tune on $UBER and $LYFT. 

Analyst estimates are generally expecting an almost full recovery in mobility revenue (Rides) in 2021, which might be a little aggressive. Still, even if it is, there is no doubt both companies are growing at 20-30% absent the pandemic. 

For fundamentally growth companies, they are trading at pretty attractive multiples on “recovered” financials. $UBER is trading at 6.2x, and $LYFT is trading at 4.3x 2022 estimated gross profit when they are expected to speed past the effects of the pandemic. $UBER is trading at a 2.0x premium to $LYFT because they are diversified with their UberEats business and have larger scale.

I’m anxious about these companies’ long-term dynamics as it relates to autonomous driving, but in the short-to-mid term, the ROIC Big Board is light on “return-from-home” stocks. I am considering adding one or both to the Big Board somewhere to hedge against the sector rotations, so stay tuned for that.

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Responses

  1. If a company other than Uber or Lyft develop Self Driving why would they sell it to Uber or Lyft instead of make their own app? They could instantly underprice them. I only think it helps them if it is their tech. I have a hard time seeing someone other than Tesla be first in general autonomy at this point. I think Google will own certain markets with Waymo but it will not be widespread.

  2. Would autonomous driving not be a potential catalyst for $UBER/$LYFT? Instead of hiring drivers they would instead own/lease autonomous car to pick up passengers. If it becomes cost effective you could potentially see a reduction in car ownership.

    1. I’ve had the exact same thought in my mind for awhile.  They would have to purchase a lot of vehicles to actually make it happen, but it could be a big game changer in the future.  There would be a fair amount of challenges they’d have to work out… one that comes to mind – how would they go about cleaning these cars if riders trashed them (which we know they will)? 

    2. In this scenario, would Uber or Lyft be the winners? Or just the incumbents to be disrupted? Looking at Google’s self-driving taxi service, which is the most developed right now, it doesn’t seem like they really need to partner with an existing ride sharing app as opposed to taking the entire pie for themselves.

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