The Lucrative Service Giant In The Weeds, $LYFT

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The company has been down ~34% since its high in March, but it has posted pretty darn good earnings, with many metrics up, like rev up 28% YOY, rides up 23%, and, more exciting, their media up 250% YOY. This is also coupled with a great beat on EPS, reporting 0.15 compared to the estimate of 0.07.

That said, it could look grim in the future, especially with $UBER taking this industry by storm and growing crazily. But that isn’t the whole picture; $LYFT is going another route because they see this and are adapting, making their own media company, attempting to rival $UBER once again, which has seen rapid growth rates, being up 250% YOY. This is expected to continue this immense success to 2027, when its $50 million in revenue is estimated to amount to an astounding $400 million.

To give you the general picture, Lyft Media is the advertising arm that lets businesses reach riders throughout their trips with Lyft. Ads are displayed on riders’ phones, in-car tablets, bike-share stations, and even on Lyft vehicles’ rooftops. It’s a new program designed to help businesses target potential customers on the go.

In my opinion, this is a great business move to diversify its revenue growth and outdo Uber.

Their cash balance is still relatively healthy, at $1.67 billion, with only a 5% year-over-year decline; it is not going anywhere, especially with the pace they have been on. They have a large amount of ~$971 million, leading to a net cash of ~$650 million. This will last them the next 2-3 years, so I have no worries, as they can transition to a profitable company during that time.

The price on the market is still low; $UBER, on the one hand, has a P/S ratio of 3.88, whereas $LYFT is 1.12. I understand that $UBER is expected to have a crazy rise to the top, and that’s factored in, but $LYFT is on pace to have a gross bookings CAGR of 15% for the next three years until 2027.

Their struggle to profit is the only knock on their business besides the formidable $UBER competition. They have been able to shred a lot of expenses and almost make a net income but come short every quarter. This seems pretty daunting, but the ad system installed should assist with this significantly, as it has minimal costs.

That said, let’s take a peek at analysts’ profitability outlook. They estimate a net income of ~4% by 2027, aligning with Uber’s margin of 5.06 last year.

Let’s put everything together and apply a P/E ratio here by 2027.

So, we have a current revenue of $4.40 billion for 2023. In the next four years until 2027, it is estimated to grow 15% for gross booking; with last year’s growth of 14% gross booking and rev growth of 8%, we can safely assume their CAGR rev growth will be ~9%, especially with the addition of a fast-growing ad business.

By 2027, the rev should be ~$6.2 billion, and with a 4 percent expected net income margin rate, this will amount to $250 million+ net income.

If we factor that into the $5.24 billion, we get a fwd P/E outcome of 21x.

It’s not the greatest, but compared to $UBER sitting at 100X+, it’s better; we could also safely assume their margins will improve to better than 4%, but I’ll use what the analysts suggest.

Looking at the technical side, we reached a point of great support where we could trail to $12.41 a share, but there seems to be a firm grip on it, so I wouldn’t expect it to crack below that level. I will update you if I see a possible formation of a reversal out of this downtrend.

I am highly optimistic about $LYFT and their future, but the immense burden of grand competition between $UBER and them could leave more to be desired by $LYFT. Maybe with the surplus of cash they have, they can develop something that will attract more attention to $LYFT for riders and drivers, but for now, it seems they have a linear growth trajectory. 

Just keep in mind that $UBER seems to be taking the cake and walking away with it in this area, but $LYFT still has mass growth potential with its new expenditures and could have many more in the future with all the excess cash. So even if $UBER looks that great, $LYFT can still operate at a high level, especially with this growing industry.

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