IPOMay 10, 2019
Uberchocobears

How Shares Are Priced (Uber @ $35)

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.

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Uber 2muchblind May 10, 2019

It’s also about future potential, not just revenue. Whether investors believe the growth plan of the company.

Uber chocobears OP May 10, 2019

True, but a revenue multiple of 7x (at 85B valuation) is 40% too high. That’s way out of range.

Airbnb tsG3j1 May 10, 2019

Uber's growth story isn't great either

Google ovBk62 May 10, 2019

Potential matters too. Uber has a wider market than lyft. Netflix is 10x, for example.

Wayfair Uphill May 10, 2019

Netflix is profitable though right? So different methodology

Uber chocobears OP May 10, 2019

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. 🤷🏼‍♂️

Wayfair Uphill May 10, 2019

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)

Uber chocobears OP May 10, 2019

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.

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Uber Xidl May 10, 2019

Eats is already factored in. Didi grab and atg adds another 15-20b imo so 75-80b is fair conservative estimate

Oracle IAExcptn May 10, 2019

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

Facebook thelos May 10, 2019

What is your price target for Lyft based on this same line of thinking?

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Ω May 10, 2019

0$ I feel like both of these companies could cease to exist in like 10 years. Depends how this self driving stuff plays out.

Uber chocobears OP May 10, 2019

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)

Uber Kumbaya May 10, 2019

Lyft doesn't have 3 billion revenue Einstein.

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going2g May 10, 2019

I think he's basing the revenue numbers on Q1 2019 data.

Uber chocobears OP May 10, 2019

Lyft makes about $750M quarterly rev (projected) and Uber makes $3B. Annualize that.

Google anons2 May 10, 2019

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

Grab Comeonlah May 10, 2019

You also need to remember ubers stake in Didi, Grab and Careem. All that is also part of the company value.

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going2g May 10, 2019

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.

Uber chocobears OP May 10, 2019

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.

Lyft 🌸Moana🌴 May 10, 2019

huh? in 2018 lyft had 2.2B in revenue and lost 900M.