Lyft, Inc. Class A Common Stock

Sharing research I’ve started on $LYFT and my hypothesis that it **is currently underpriced at ~$44**. I’ve read through their filings since September 2019 and made my own rudimentary forecast for what I think their P&L could look like in 2021. **My price target range is $59 to $68 by the start of 2022** and I look forward to seeing how Lyft recovery is pacing when they announce their results on February 9th.


![](https://cdn.commonstock.com/e68cc4a2b540c6e4f968069ca8b3c3b53ea2e29a805ab0307070d973fabf4b9b-1531x511.png?w=704&fit=max)

I was drawn by curiosity to understand why **LYFT Price/Sales was at a multiple of ~5 (and has been practically since IPO) while UBER is currently trading at a 7-7.5 multiple**. But let’s ignore this for now. LYFT is a ~$14B market cap company with ~30% ridesharing market share in North America. **In CY20Q1** (ending March 31) they had an adjusted EBITDA of -$85M, **within striking distance of profitability** had the last two weeks of the quarter not begun a worldwide pandemic.

Pre-COVID (end of CY19), LYFT had many **all-time bests: 22.9M Active Riders, $44.4 revenue per rider,** lowest expense as a % of revenue for two categories in the trailing 4 quarters: Ops & Support (‘Ops’) and Research & Development (‘R&D’) expanding margin Q/Q.

COVID travel restrictions and related responses materially decreased demand for the platform. In response, Lyft paused Shared Rides, distributed thousands of masks, hand sanitizers, and partitions to drivers, and required face masks for all drivers and passengers. Lyft also took internal action, laying off 17% of their workforce, furloughing 300, and reducing compensation 10-30% for employees, the senior leadership team, and members of their board. **Ridesharing decreased by -75% y/y in April 2020, decreasing Active Riders to a mere 8.7M; surprisingly, revenue per active rider of the few that remained only fell -2% to $39/rider the following quarter.** But what a devastating blow to any industry.

But all is not lost! In addition to restructuring, LYFT decreased Sales and Marketing (‘S&M’) spend to the lowest it’s been as a % of revenue (15% CY20Q2), which helped offset revenue loss. Recovery of ridesharing is slowly starting to come back as lockdowns ease, with the **most recent datapoint in October showing ridesharing being down only -47% y/y.** Similarly, CY20Q2 was the worst quarter for revenue and it’s been recovering since. See this comparison of LYFT revenue vs. UBER revenue broken out by their Rides/Mobility segment and their NAMER region (couldn’t find Segment+Geo combination data). **LYFT is visibly recovering faster in terms of ridesharing** while Uber revenue is being offset by food delivery. While good for Uber in the short-term, this suggests that **Lyft is going to exit the pandemic with a larger share of the ridesharing market.**

![](https://cdn.commonstock.com/21e8b1af1b9066a72f5284f1009b2edcb8cf239d25c35180c8d55c83c34877b4-571x120.png?w=704&fit=max)

**If rideshare recovery continues linearly, we might expect a full recovery by August 2021.** Distribution of a vaccine is likely to pull this forward in the medium term but mounting COVID cases and slow vaccine distribution could mean short-term recovery may not follow recent trends. As mentioned, Revenue per Active Rider was resilient and likely to reach pre-COVID levels quickly. I think LYFT will continue its diligent margin expansion in the long-term, and **reach EBITDA profitability by the end of 2021 or in the first half of 2022.**

**In summary:**
1.  LYFT is taking US market share in ridesharing from UBER as it recovers revenue faster
2.  Margin expansion will continue post-recovery and LYFT will reach profitability in 12-18 months

Given this, I believe that LYFT is underpriced relative to UBER. **In 2021, I expect LYFT to recover back to CY19 revenue levels ($3.5B), which at current P/S multiple (~5.2) I expect the share price to be $59. If investor sentiment improves given profitability and using Ubers P/S multiple (~7.6) I would expect share price to increase to $68.** I’ve taken a position in LYFT and am considering more.

**Caveats:**
- I didn’t consider balance sheet concerns as LYFT has $2.5B in cash which I currently consider enough liquidity to reach this price target via recovery on the P&L.
- I didn’t consider regulatory risk increasing pressure on margin.
- I made what I felt were reasonable assumptions about OpEx as a % of revenue as I modeled margin expansion, ridershare recovery, and Revenue per Active Rider.
- I briefly considered whether LYFT P/S was valued fairly and UBER was overvalued. However, it just doesn’t make sense to me that UBER market cap is ~$100B globally (60% US and 85% Rides/Mobility) and LYFT is ~$14B w/ 30% (and increasing) US market share. So I think LYFT is being underestimated.

**Next steps for me:** Monitor LYFT earnings on Feb 9th to see how recovery is pacing. My model will 100% be wrong but directionally I want to see whether any trends are accelerating or decelerating, or whether the LYFT leadership team changes priorities or launches new products.

I am super open to feedback or discussion - do you agree or disagree with the thesis? Please DM or comment!

I love the analytical approach you took and the discussion of the caveats. Very thorough. Thanks for sharing! This is good stuff.

Nathan Worden

Uber has captured the business travel part of the market very well with their global presence. That's the moat that's very difficult to get over for Lyft. Rides is a loss business for Uber as well; but they capitalize it well enough on the UberEats.

I was tempted to try LyftPink; I already use UberPass. Biggest cost of me moving to Lyft is the points that I accumulate from my business travel which I use in my personal rides (obviously that changed with Covid)

Once my Uberpass expires; I might give a try on LyftPink.

Gaurav Mishra

Tom Scopazzi

really awesome analysis @steven_xu - you convinced me to take a position in $LYFT earlier last month pre-earnings and your hunches seemed to have been proved directionally correct based on yesterday's earnings. nice work!

John Whipple

$LYFT - Underpriced and Underestimated

New position in LYFT

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