Lyft had a pretty bumpy ride and is currently trading at 54 EUR. This is actually lower then its IPO offering at 66 EUR 5 years ago. The company got especially hit hard during corona, as who the hell would want to use taxi’s now? Riding a taxi now could mean a high Risk contact so most people rather avoid taxis for the time being.
Lyft is also not profitable yet, as they are still investing heavily into growth.
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I recently took a small stake in Lyft (28 stocks at 56.8 EUR). I admit the stock has seen already a pretty big recovery since the Covid crash so I was unsure if perhaps the ride could be over already, but I did not buy this stock as a Covid recovery stock. I always invest on the long term.
More about why I bought it is bellow, but I do want to start off with some risks first.
Risks & Uber vs Lyft
With Taxi’s currently at a low point caused by a drop in travel, but also because sharing a small confined space with someone is just not safe anymore these days they struggle to grow and bring in revenue.
Have a look bellow, and see how big the revenue drop was during the top of corona.
Its direct competitor in the US market actually managed to perform better and even come out on top:
This could be related to the fact Uber is a lot more then its ride hailing app, for example Uber eats is one division that must have benefitted immensely from corona.
At first sight Uber seems to have an advantage here, and yet I bought Lyft. The reasons are further down, for now just keep in mind Uber is valued 5 times higher then Lyft as well so the expectations are logically higher.
Even when Corona would come to an end Tax Apps continue to struggle with local legislations. We are over 5 years after Uber and Lyft saw immense popularity growth in US markets, but up to this day I still cannot “hail” an Uber or Lyft Taxi in my home town.
Lastly with so much debt and income loss, Lyft is an easy victim for interest increases & inflation in loans. That doesn’t mean inflation will happen. Actually I do not think it will, or not severe anyway. Keeping interests low has allowed US company’s to take large market of technology sectors worldwide, and I don’t think they are ready to give up this advantage.
Three reasons why I bought Lyft
#1 I like and believe in ride hailing apps
I wouldn’t want to invest into something I don’t believe in, but ride hailing apps have really made my life easier. Especially during travel you used to have such a big chance to get ripped off. I feel very comfortable with using ride hailing apps abroad. Its safer and cheaper and I would take them over a normal taxi any time for private or work related travel.
#2 Corona recovery stock
There I said it. Despite that the title says otherwise of course.
But when we look at the quarterly results we can see that Lyfts revenue has actually been slowly growing
This unlike Uber where it has been slightly more volatile and where we even see some drops
Now this is not the reason I chose Lyft over Uber or over any other stock for that matter but I would expect slightly better recovery from Uber considering its 5 times bigger then Lyft. Knowing this Lyft then becomes more attractive again. Also with the US reopening soon a 40% increase in revenue can be expected in 2021, this will not recover Lyft to its pre-2020 levels, but its getting close and it remains pretty huge.
#3 Autonomous driving is key
And here we come to the main reason why I am big on $LYFT. While a lot of car companies like TESLA are hoping to launch their own ride-hailing apps when they have autonomous cars, LYFT already has a huge network available for its app. For car companies autonomous driving might not even be so beneficial, as I would expect car-sharing to increase and car sales to drop as cars become more autonomous.
Lyft has a partnership with Motional / Aptiv to develop and test autonomous cars. The only reason the Motional car company exists is because they want to have autonomous cars. So unlike other car companies they have every intention of producing autonomous cars because this is their whole purpose of living. Look at this blog post of 30th of March 2021, where they clearly state they plan to introduce the hailing of autonomous driving
Now they do state that the level of automation will “only” be level 4. But this is pretty big, because it basically allows your vehicle to be autonomous under certain conditions, most of all level 4 means that you would not need to take over driving if these conditions are met. So no driver would be required!
Only 1 level 3 car has been approved worldwide so far and that’s a Honda in Japan, so the jump to level 4 is pretty big and I admit I am a bit skeptical if they can meet this 2023 deadline..
Now as I stated in my article about Volkswagen stocks I think the biggest hurdle is getting it approved. So that is the big question, can Lyft / Motionless get approval for their level 4 car, and under what conditions will it be able to drive autonomous? I believe this is really what they are planning, as they state on their website the service they will launch will be fully driverless.
Its clear this first step in 2023 is not the final step, but it is a huge one, and by purchasing LYFT I will be on the first row to see it happening. If successful it can not only mean a huge boost in income, as they no longer need to pay their drivers, but it can also mean a boost to the stock.
You could also invest in Motional by buying Aptiv stock for example. The only thing is in this case you are really fully dependent of both a successful technology and a legislation that allows driverless cars. On Lyft you always have the ride hailing business to fall back upon.
That doesn’t mean Aptiv stock is not one to watch, I have it on my watchlist myself and don’t exclude to jump into this stock at some point in the future.
Should you purchase $LYFT?
I am not your father, I am not your bartender and I am definitely not your financial advisor. You should absolutely do your own research and due diligence before investing in a stock, and perhaps seek out real financial advice.
What I can see is that this stock still contains a lot of risks, but it also contains a huge upside potential if motional can make the autonomous driving expectations a reality.
My personal belief in ride hailing apps, a post-corona recovery and my bet on autonomous driving has convinced me to purchase 28 LYFT shares at the price of 56.8 EUR. So not a huge share, but an initial share that will help me watch the stock and track its earnings. I also see this purchase as a front row ticket on the revolution that will come sooner or later of autonomous driving.
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