A quick primer for stock market noobs:
Companies in similar industries fall within a range of valuation metrics. Since both Lyft and Uber have negative earnings, we can’t use P/E (price to earnings) as the benchmark. Both companies have revenue, however:
Lyft
$3B annual revenue
$15B valuation (market cap)
= 5x revenue multiple
Uber
$12B annual revenue
5x revenue multiple
= $60B valuation
~ $32 share price
So don’t be surprised to see the market value Uber at about $60B until the financial picture changes substantially. My own price target is $65B or about $35 a share.
comments
I do believe Uber will command a premium due to the broader market and multiple verticals. But don’t think it will be huge. More than a 15% premium over Lyft seems excessive. 🤷🏼♂️
Expect $30B valuation.
Unlike Amazon IPO, for example, Uber is not cash flow positive.
One ref:
https://www.marketwatch.com/story/ubers-ipo-is-even-more-dangerous-for-investors-than-lyfts-has-been-2019-04-29
This comment was deleted by original commenter.
So based on this line of thinking, the price I expect for Lyft is the current price of Lyft.
However, I do guesstimate that Lyft should trade around $60 a share. (Approx. 17B mkt cap)
OP don't you think ignoring the earnings per share favours Lyft here?
In Q1, Lyft's operating loss is higher than its revenue! Uber's operating loss is 1/3 of its revenue.
Their loss in Q1 of this year is greater than their loss for all of last year!
Why was it 60 degrees at noon today? 🤷🏼♂️
There are millions of participants in the US stock market. Investors seek to allocate capital. Prices adjust in response to demand, sentiment, expectations, information.
Curious your thoughts on Wayfair's valuation then at a little under 2x rev (also unprofitable)
In theory, growth rate is factored into the *share price*
The revenue multiple is just a simple metric (mkt cap / revenue) used for comparison
You’d want to find other public online retailers to compare Wayfair. Look for their annual revenue.