It’s been five weeks now since Lyft has gone public. In that time, Lyft has taken a 38.6% haircut from the peak reached on the very first day of trading — Fibonacci fans rejoice. With the Uber IPO on deck, investors are surely wondering if it will turn out like Lyft’s IPO or if it’s different this time. Or maybe the entire ride-sharing business model is in a bear market.
To help get a clearer picture, I looked through Canalyst’s pre-IPO and equity models to compare the two companies. One of my favorite things about their models is uniformity. I can easily compare two similar companies and get custom comp sheets made upon request. Follow @CanalystModels on Twitter and then DM them with promo code RAMP and they’ll email you the Uber and Lyft models for free.
A couple of things that I thought were interesting in the model comparison:
Uber’s take rate, or the percentage of revenue made per gross booking, is much less than Lyft’s and the gap is getting wider.
Overall, Uber expects their take rate to decrease in the near term (P112 of S-1/A). They may reduce driver incentives based on market dynamics, which would increase their take rate (P115). However, increasing their take rate was not currently communicated as part of their growth strategy.
Lyft, on the other hand, “expect [their] revenue as a percentage of bookings to continue to increase over time as [they] improve the utilization of driver hours, increase the efficiency of driver incentives and grow revenue from [their] network” (P83 424B).
NOTE: Canalyst does not provide any projections and has NOT performed company-specific research on the forecast period. Numbers in the forecast section (starting from 2019) are an extension of the historical trend with consideration to the company's own projections (if provided).
It’s also interesting to note that Lyft’s bookings per ride are much higher than Uber’s. Since 2017, Lyft’s bookings per ride are more than 30% higher than Uber’s. It is worth noting that the bookings are defined slightly differently between the two companies, but still comparable.
Uber’s booking definition is defined as the total dollar value, including any applicable taxes, tolls, and fees, of ridesharing and New Mobility rides, Uber Eats meal deliveries, and amounts paid by shippers for Uber Freight shipments, in each case without any adjustment for consumer discounts and refunds, driver and restaurant earnings, and driver incentives. Gross bookings do not include tips earned by drivers.
Lyft’s booking definition is defined as the aggregate charges for rides on their platform, as well as other revenue, net of the following reductions:
any pass-through amounts paid to drivers and regulatory agencies, including sales tax and other fees such as airport and city fees, as well as tips, tolls, cancellation and additional fees;
the aggregate amount of market-wide price adjustment promotions offered to ridesharing riders; and
any discounts for renters of bikes and scooters
NOTE: Canalyst does not provide any projections and has NOT performed company-specific research on the forecast period. Numbers in the forecast section (starting from 2019) are an extension of the historical trend with consideration to the company's own projections (if provided).
Uber and Lyft essentially control the entire ride-sharing market — with Uber controlling a much larger piece of the pie. Lyft is already taking market share and I expect this trend to continue. We aren’t talking about iPhone versus Galaxy here. We are talking about someone driving you from point A to point B.
On a high-level view, does anyone care which company takes them on the ride? I would argue most people only care about price and convenience. A select few may care about safety or the company’s reputation but that will assuredly rest on each individual driver — who, by the way, is probably driving for both companies. Either way, I see price wars occurring sometime in the future which will hopefully help the consumer.
As of October, Uber and Lyft combined owned nearly 98 percent of the U.S. consumer ride-sharing market, according to new data from Second Measure, a company that analyzes billions of anonymized credit and debit card purchases. Uber held 69.2 percent (3 percentage points lower than in October 2017) according to Second Measure, while Lyft controlled 28.4 percent (3 percentage points higher than last year). Juno, Gett and Via split up the remaining 2.4 percent.
Uber has more revenue verticals stemming from its core business while Lyft has focused more on its passenger transportation business. If Lyft wants to get into these other transportation verticals they may have to sacrifice profitability similar to Uber.
In the lead-up to its 2019 IPO, Uber is pitching itself as a full platform for transportation and logistics, not just ride-hailing. The company hopes that moonshot projects such as Uber freight, electronic bikes, autonomous driving and its development of flying cars will help it own a piece of every trip across any vehicle. However, these segments are costly for Uber to develop, weighing on Uber’s long-term profitability.
While I only touched on a few items that I thought were interesting in the models, this doesn’t give the complete picture. I would suggest getting into the models yourself and digging through the margin analysis, cash flow analysis, and GAAP (Non-GAAP) financials to see what other trends you can find before you take the plunge.
Per a recent report:
Uber is reportedly looking to sell shares between $44 to $50, aiming to raise $8 to $10 billion in the offering. This would value the company between $80 billion to $90 billion, Bloomberg reports.
Previous reports had pegged Uber’s valuation at around $120 billion. Still, that valuation is higher than its last valuation of $76 billion following a funding round.
For Uber’s sake, they better hope the hangover from Lyft’s IPO starts residing soon. I can assure you the debacle from the Lyft IPO sure isn’t helping investor sentiment. Uber investors better buckle up and hope their IPO fares better than Lyft’s.
Full disclosure: I do not own shares in $LYFT or $UBER but my positions may change from time to time.