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Lifting IPO investors must have their head in the cloud to believe in this stock



With riding wheel service, Lyft has priced its original public offer of $ 72 a. Stock – valuation of the company at $ 24 billion before its share starts trading on Friday. There is only one conclusion.

Someone has the head in the cloud.

Not the clouds – the cloud. The price and the deal will only stop if you see San Francisco-based Lift

LIFT, + 18.95%

as heir to cloud computing companies like Salesforce.com

CRM, + 1.34%

Rackspace, and of course Amazon.com

AMZN, + 0.47%

Even fighters known to other companies like Alphabet

GOOG, + 0.13%

GOOGL, + 0.16%

and Microsoft

MSFT, + 0.42%

has juiced valuations by entering a cloud computing trend investors are willing to pay for.

The purpose here is not to dispute whether they should. But if you are considering hunting up the price after the first prize, probably producing a value of up to $ 30 billion, you should consider whether Lyft is really in such a category.

Let's run some numbers first. With $ 30 billion, the Lift command has 14 times last year's sales – not earnings, but sales. Lifting has no profit after any standard – not net income, not operation or free cash flow. It will take a while before they arrive, and even then they will be modest for several years.

Lifting is a different game than known, true Web names. Amazon has stuck to its now decades-old formula of investing heavily and producing modest net income as equipment depreciated by cloud computing servers but delivering dead cash flows.

For all Donald Trump's caviliers on Amazon's low profits and the large stock price, Amazon's market value is $ 871 billion. Only 28 times last year's operating flow, which was 60% higher than the year before, when cloud computing seriously went off. Growth that way will get you a prize and it will. The Amazon share price is 3.3 times forecast 2019 sales. Twitter

TWTR, -0.49%

long considered financially shaken for a dot-com, is 19 times subsequent cash flow and seven times in the year's sales. Facebook


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