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.
Potential matters too. Uber has a wider market than lyft. Netflix is 10x, for example.
Netflix is profitable though right? So different methodology
Netflix is an outlier though... P/E around 130 is nuts. 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. 🤷🏼♂️
Thanks for the intro, very helpful! So future potential is factored into the multiplier? Is 5x common or high for unprofitable companies at such scale? Any other examples at Uber or Lyft size on the market? Curious your thoughts on Wayfair's valuation then at a little under 2x rev (also unprofitable)
No probs! 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.
Eats is already factored in. Didi grab and atg adds another 15-20b imo so 75-80b is fair conservative estimate
It lost $3B last year, and for many other reasons I think it’ll get much worse before it’ll get better. Expect $30B valuation. Unlike Amazon IPO, for example, Uber is not cash flow positive. One ref: https://www.marketwatch.com/story/ubers-ipo-is-even-more-dangerous-for-investors-than-lyfts-has-been-2019-04-29
What is your price target for Lyft based on this same line of thinking?
0$ I feel like both of these companies could cease to exist in like 10 years. Depends how this self driving stuff plays out.
This method uses Lyft (most comparable company) to set the benchmark. 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)
Lyft doesn't have 3 billion revenue Einstein.
I think he's basing the revenue numbers on Q1 2019 data.
Lyft makes about $750M quarterly rev (projected) and Uber makes $3B. Annualize that.
Public Companies/ shareholders Won't put up with sustained losses like private investors. Food delivery is a terrible business, and ubers core product is a commodity where users are solely price conscious. Terrible, terrible business
You also need to remember ubers stake in Didi, Grab and Careem. All that is also part of the company value.
Stock market noob here. 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.
Yeah I agree... this is a very simple benchmark. If you want a more accurate valuation, you could calculate more metrics and then triangulate a value that is a combination of more things. Personally I don’t know what the path to profitability looks like for either company.
huh? in 2018 lyft had 2.2B in revenue and lost 900M.
It’s also about future potential, not just revenue. Whether investors believe the growth plan of the company.
True, but a revenue multiple of 7x (at 85B valuation) is 40% too high. That’s way out of range.
Uber's growth story isn't great either