Investors hungry for that new-stock smell can finally get behind the wheel of Lyft (NASDAQ:LYFT). The country’s second-largest ridesharing service went public on Friday, and it fetches a valuation that’s not for the squeamish.
Many of my fellow Fools are really, really, really bearish on Lyft stock given its lack of profitability and nosebleed valuation multiples. But it doesn’t have to be that way. Let’s take a look at some of the reasons why Lyft might still be a winner for investors…
1. Lyft is putting the pedal to the metal
To say that Lyft is growing quickly is an understatement. Revenue more than doubled last year, and that 103% pop follows Lyft’s top line more than tripling in 2017. Hitting the market at a stock price of $72 — and with the shares opening just north of $87 on Friday — a revenue multiple in the midteens isn’t ideal given its trailing revenue of $2.16 billion, but it’s not ludicrous given how fast Lyft’s growing.
If you believe that we’re still early in the sharing economy in general and ridesharing in particular, the valuation will sort itself out in time. Revenue will probably continue to decelerate at this point, but if the slowdown is gradual, Lyft’s going to be a winner.
2. Uber’s IPO will make Lyft look even better
Uber expects to go public later this year. There is a wide gap between Uber and Lyft, as the former’s self-reported financials show $11.3 billion in revenue for 2018. Uber is currently being valued at roughly $120 billion, and commanding a price tag that is four to five times Lyft’s market value may seem proper, at first glance, for a stock generating more than five times the revenue. However, let’s take a closer look at where each company is in its respective growth cycle.
Momentum is slowing markedly at Uber. Revenue grew at a 43% clip in 2018 — well below Lyft’s pace — and those gains decelerated to a 25% uptick in its latest quarter. There are also new revenue streams for Lyft to explore if it should decide to…
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