Lyft Inc. The initial public offering will give investors their first chance to invest in a ride-sharing service that is growing fast and capturing significant market share from its bigger rival Uber.
That’s the view of D.A. Davidson analyst Tom White in a note to clients initiating coverage of the stock with a buy rating and price target of $ 75, or 10% above the top of the company's IPO price range of $ 62 to $ 68. The lift is expected to price the deal next week and it's already oversubscribed, according to the New York Post.
Lyft has grown its market share to 39% from 22% in past two years, benefiting from the public relations and operational troubles at Uber, which is also planning to go public this year.
Uber's former chief executive Travis Kalanick was forced out in 201
But Lyft is "deftly maximizing the benefits by aggressively differentiating its brand / mission around socially-conscious values and corporate responsibility, ”White wrote in a note. "This is good PR, but also good for business (~ 80% of LYFT's New Active Riders in the fourth quarter of 2018 downloaded the LYFT app organically."
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US consumers $ 1.2 trillion annually on personal transportation, said the analyst. For TaaS players – or transportation as a service – that can lead more Americans to move away from their own car in the coming years. the benefit they offer their customers in terms of convenience and value, said White
DA Davidson is expecting the US market opportunity for riding-sharing to grow to four times the size of the historical taxi and limousine market, or roughly $ 105 billion .
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Where Lyft is lagging rivals is in the development of self-driving technology, partly because of its size and lack of scale, said the note. But tie-ups with self-driving partners can give it time to either address the issue of size, perfect its own technology or link up with a longer-term partner.
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White is expecting to grow revenue at 56% to $ 3.4 billion in 2019 and to grow it another 30% by 2020.
“Our LYFT valuation framework assumes the company achieves ~ 31% bookings share of this opportunity at 2029 (vs. an estimated 15% share today), ”he wrote.
The main investment risk is whether the company has room to become profitable while remaining number two in the market, said the note. Lifting has actually increased its losses in recent year, while Uber's losses are shrinking. Lift's GAAP EBIT loss in 2019 was $ 988.8 million, more than the $ 708.3 million posted in 2018. Uber, in contrast, posted a 2019 GAAP net loss or $ 1.8 billion (excluding the sales of its Russia / Southeast Asia businesses), versus a loss of $ 4.5 trillion in 2018. "Near-term, LYFT's ability to reduce incentives for drivers and riders (critical tools for creating balance in its ride-sharing marketplace) will be key to its near-term profitability outlook," said the note.
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Other risks include regulation. Regulators were caught on the back foot when riding-sharing first exploded on the scene and are still trying to catch up and create policy to address the complex issues that have arisen. The issue of driver classification has not been resolved with the ride-sharing companies eager to retain the right to treat drivers as independent contractors and not workers, who would be entitled to benefits.
MKM Partners analyst Rob Sanderson said last week that Lyft “is one of the most significant listings for the internet sector and will be seen as a barometer for risk appetite and the IPO pipeline.”
Without initiating coverage or offering a recommendation, Sanderson trawled through the company's S-1 IPO filing with the Securities and Exchange Commission and said it offers the most insight yet of the workings of one of the largest consumer markets to be disrupted by technology.
"We believe this is much more significant than a taxi substitute, that transportation will become a service for many consumers (if not most) and that transportation networks will become increasingly automated in the future," he wrote in a note.
Like White, Sanderson is expecting to continue and highlighted Uber's size advantage at about twice the size of lifting.
"Are Lyft's gains more one-time, with Uber's scale and brand power set to normal share recent dynamics, or will momentum continue for the founder-led platform against professional management hired to clean up and mess? “He asked. "Differing strategy on geographic expansion and adjacencies is important, but we think strategy and execution towards an autonomous fleet will be a more critical success factor over the long term." Lift has applied to list on Nasdaq under the ticker symbol "LIFT . ”
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