About Lyft
Being in second place isn’t necessarily the worst thing in the world.
Look at Pepsi and Coke, Microsoft and Google, Visa and MasterCard, Boeing and Airbus and, of course, Uber and Lyft.
But sometimes it really just isn’t the most desirable outcome by any means.
Now, let’s make one thing clear right off the bat; Lyft truly is a ways away from being as large, scaled, powerful and ubiquitous as Uber, and in this particular case, while Lyft is still a ginormous rideshare company, the insult to injury in being second place stems largely from the fact that this is an industry, like food delivery and other gig economy-related apps and platforms, that is heavily reliant upon offering customers promotional deals so as to both attempt to undercut the competition but also remain in their user’s good graces, and boy does Lyft need to remain in their good graces.
Simply being around my friends and colleagues at the University of Texas, I don’t think I’ve heard someone mention that they were waiting on their Lyft one single time, but I’ve sure heard plenty say that they’re catching an Uber, and in many instances opt to select Lyft’s competition given that they received a steep, hard-to-decline promotional discount from the company, which, for a company with the market share and relative pricing power such as Uber makes sense given that it can likely afford to do so, however, for a company like Lyft, offering such lofty promotional offerings might literally not be an option.
Being a gig worker myself over the years, I’ve come to gradually realize that the business models for companies such as Uber and DoorDash are really far from optimal, primarily in the context of being net profitable, as in addition to these entities relying heavily on offering discounts just to keep customers using their platform, margins are naturally thin due to the all of the masters they must serve, including their independent contractors (fancy way of saying their drivers), as I know firsthand that certain orders and certain areas, whether it is picking up food or it is picking up people, are less desirable than others (for a multitude of reasons), and the more seconds that tick by and someone’s burrito is getting cold or someone’s waiting for their ride to the airport, the higher these companies are forced to pay their drivers, and drivers know this and they can be quite selective, because they in large part realize that they can be.
Also, at the end of the day, Lyft (along with the other aforementioned companies) is a technology company at its core, and technology companies have to always be investing and reinvesting so as to simply stay relevant with the consumer and the members of their workforce, and this irrefutably costs a pretty penny, yet another source of instantaneous margin erosion.
Nevertheless, Lyft is still a very popular rideshare company (reportedly holding over a quarter of the entire rideshare industry) and given the continued emergence of the experience-based economy being phased in by the rising younger generations, on the revenue side of things, I would venture to guess that the company isn’t doing too bad in terms of recent annual revenue growth, but clearly, with a company such as this one, what matters a great deal is how much cash it is burning through in attaining these revenues, and if any improvement has recently or is currently being made on this front.
Let’s figure Lyft out, friends.
Lyft’s stock financials
Trading at a share price of $17.20 with an accompanied market capitalization of $6.93 billion, Lyft also maintains a nonexistent price-to-earnings (P/E) ratio and shocking absolutely nobody, the company’s annually issued dividend stands at zero dollars and zero cents, which we will most definitely not being holding against this company, as much larger and established technology giants do not pay out dividends due to the aforementioned investment and reinvestment nature of the tech sector more broadly.
Plus, Lyft probably couldn’t afford to pay out a dividend even if it wasn’t investing and reinvesting, as it would more than likely still be too much of a cash drain for the company, especially at this juncture mixed with the current state of the economy.
In addition to being goose egg on the dividend, I was also not expecting this company to have a readily available price-to-earnings ratio primarily because Lyft, on a net basis, is not yet profitable, which can initially be identified by the company’s earnings per share (EPS) metric being tucked away at -0.90, but without this confirmation we could’ve still made a very educated guess in asserting that this ride-hailing platform was yet to be out of the red given everything I’ve mentioned in previous paragraphs as it pertains to required investment and the constantly shifting technological landscape.
And it doesn’t help that the company is second in line to such a strong, profitable (on an operating income level, not an annual, net basis) competitor.
But this stock analysis article is on Lyft, so I clearly digress.
All in all, no surprises thus far.
Moving right over to the condition of the company’s balance sheet, Lyft’s executive team and board members are at the helm of around just north of $4.5 billion in terms of total assets as well as approximately $4 billion in terms of total liabilities, and I just frankly find myself feeling net grateful that the company maintains more total assets than liabilities on its books, affording itself a bit of room (albeit admittedly not a massive amount) to finance some more growth initiatives and moving forward, also maintaining a fair amount of capital on hand so as to offer me some confidence that Lyft isn’t going out of business anytime soon, at least by means of overleveraging itself into oblivion.
This is a tech company’s balance sheet, so again, like a bad car, no shocks here.
Regarding the state of Lyft’s income statement, since 2019 the company’s annual revenues have been flat-to-slightly growing, hanging out at around $3 billion during 2019 and 2021, rising to $4 billion territory during 2022 and 2023, notably bucking this overall trend in between with its revenues dipping in 2020 to a relative low of $2.3 billion, which really does uncover a cushion that Uber has that Lyft does not; food delivery.
While we are sure that during the initial hit of the Pandemic Uber experienced some softening within its ride-hailing segment, what it lost there it most definitely made up for (and then some) through its food food delivery arm (and its lesser known freight and logistics segment, as well), with folks stranded at home yearning for neighborhood favorites or even, dare I say, Jack in the Box, whereas Lyft, being absent of a food delivery division (which is already too saturated at this point so the likelihood it is going to try entering that category at this point is incredibly low, as it frankly should be) was just stuck with notably less ridership as a direct result of less folks going out.
Compared to Uber, this is an inherent vulnerability that Lyft will forever face.
According to the company’s cash flow statement, Lyft is indeed losing money each and every year (at least when looking at the period during and between 2019 and 2023), for example, reporting a range within its total cash from operations between -$1.38 billion (2020, of course) and a relative high of -$98 million, as reported in 2023, the other years averaging out between -$100 million and -$200 million (or during each year that wasn’t 2020 or 2023, or periods of relative extremes), so while improvement has technically been made, the year-over-year (YOY) cash flow drainage persists but it might be slowing ever so slightly in the years to come given its most recently published figure mentioned above.
Emphasis on “might.”
Of course, time will tell but as of right now, I don’t feel confident enough to objectively say that I think a turn around in cash flows is around the corner and therefore if I do somehow decide to offer this company’s stock (NASDAQ: LYFT) a favorable rating, it won’t be because of anything on its cash flow statement.
Lyft’s stock fundamentals
Digging a bit deeper into this company’s profitability, particularly with how it measures up against its foes, according to TD Ameritrade’s platform, Lyft’s trailing twelve month (TTM) net profit margin sits at a presently unredeeming -7.73% to the industry’s respective average of 11.79%, which actually does shock me a bit because I predicted that Lyft’s TTM net profit margin would’ve been a bit closer to the industry’s average given its relative (small) size compared to the 800-pound gorilla in the space, which naturally means smaller scale operations and inherently less costs, but it seems as though this discrepancy in TTM net profit margins might just be more deeper and systemic, and justifiably worrying.
Maybe the markets that Uber dominates resoundingly mute Lyft’s profit margins (because the company is forced to be more competitive on pricing), among other potential factors.
When it comes to the company’s presented TTM returns on both assets and investment(s), Lyft has once again given myself no reason to be excited nor optimistic, with, for instance, the company’s TTM return on assets listed at -7.46% to the industry’s displayed average of 7.78%, along with its TTM return on investment perched down disappointedly low at -22.49% to the industry’s average of 9%.
Lyft has a lot of work to do on these fronts, and while I would usually say that operational consistency, some hewing down and time can lend solutions to these problems, there is an added layer of complexity and difficulty in the context of Lyft, given the ecosystem and business landscape it operates within and who it attempts to compete with, again, among other things.
Should you buy Lyft stock?
I’m not feeling the love nor any sort of spark when it comes to Lyft and its core financials and associated metrics.
Sure, given most of what I’ve seen, I don’t think this company isn’t going out of business in the near future, however, I’ve also seen next to nothing in terms of a catalyst or two (through the numbers, at least) that gets me excited about this company and furthermore, bullish on its future share price (NASDAQ: LYFT).
Namely, rideshare is a tough landscape to operate within, regardless of what place you’re in or how much market share you’ve managed to nab, the company’s balance sheet is fine, its revenues have seen their fair share of ups and downs (but again, that was to be reasonably expected given recent history), its cash flows are far from attractive, as are its TTM net profit margin and core return stats.
For now, and until I see some more intentionality out of this company and some margin improvement from management, I feel it makes the most sense to lend Lyft’s stock a “sell” rating.
DISCLAIMER: This analysis of the aforementioned stock security is in no way to be construed, understood, or seen as formal, professional, or any other form of investment advice. We are simply expressing our opinions regarding a publicly traded entity.
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