While Uber looks healthier especially given it's size, Lyft's reception after the IPO was quite negative, with the stock falling 30% immediately in the days that followed.
Even with better economics and larger scale the larger question looms, which is how do these businesses turn profitable.
Are they subsidizing a market and creating it by charging less, or will they reach a certain scale and be able to cut back on certain expenses which will give them profitability.
I don't think Amazon is a fair comparison here, because they were investing in infrastructure, building out global logistics, which is different from Uber and Lyft. They should be much more profitable because they don't have to invest in that. They don't know warehouses and logistics, and everything else that e-commerce required.
Also in the case of Amazon the supposed profits would be reinvested in the business with large CapEx spend, here it seems that the negative margins are being spent on sales and marketing, which isn't the same as what Amazon was doing when it was treading in the negative for a decade.
We lose money on every sale but make it up in volume is supposed to be a joke, not a business strategy!
30% margins for Lyft, 20% margins for Uber (and 10% for uber eats.
I've reported several fraudulent trips; trips where the driver accepts my fare and pretend he's actually picked me up and then ends the trip after some time. When I requested a refund, Uber happily credits my account, not my credit card that they billed.
Seems like some fancy accounting tricks that bump up numbers are being ignored too.
The money the got from customers for rides / food delivery didn’t cover the money they paid to the drivers / restaurants providing the service.
Edit: Ok, looking at the numbers more carefully they are still be positive after paying drivers / restaurants. But they lose money when the operating, marketing and administrative costs directly attributable to the sale are included.
Who are we kidding? Uber, already a gigantic loss machine, continues to invest in loss-making ventures like Food Delivery and E-Scooters. Uber has spread itself to so many areas and markets that I can't see how it'll ever be profitable without making huge cutbacks. The volume and growth are of little significance when they are failing miserably to contain their losses.
Compounding it is the fact that there's nothing sticky about any of their business ventures. Customers will choose the cheapest option, so they can never go beyond a certain range of prices. Even if Uber does become profitable, I highly doubt it ever will join the leagues of Apple, Google or Facebook.
The people who actually have the ability or to predict valuations/prices (better than the market) are busy making millions, if not billions, of dollars, and they most certainly aren't going to tell you about their predictions/models. If they do, it's after they've already invested or shorted the asset.
Academics identify a pattern that generates superior risk-adjusted returns and then publish their findings - this then leads to the anomaly disappearing as investors trade away the alpha.  The track record of an academic can therefore only be meaningfully discussed in terms of how well their model performs in back-testing. Saying they don't have a good track record misses this point.
Perhaps there are successful academic investors who achieve alpha and don't publish their research, however they wouldn't show up in any meta analysis.
Perhaps because they enjoy academia far more than money making?
Some people like Grigori Perelman  are just not interested in money or fame, or both.
That type of information is worth millions, and there are many investment firms offering very lucrative positions to those that can identify a pattern that generates superior risk-adjusted returns.
Outside of very rare outliers, it doesn’t seem reasonable to assume that information that will generate outsized returns will be publicly available.
Presumably not being in concordance with the market is insufficient evidence based off this and sibling comments. I wonder if there is a duration where this will even work.
Does there exist any evidence that would lead one to fail to reject the null hypothesis? Or would this model always reject?
Certainly, our current conclusion must be that Damodaran has poor predictive power over the short-term.
I guess there is no evidence that will convince everyone that someone is a bad money manager or prognosticator. That’s why, despite my general discomfort with Nassim Taleb, some of what he said in Skin in the Game really seems true. People can believe what they want, but beliefs don’t matter much if they aren’t confirmed, and the only meaningful way to confirm or reject market beliefs is via investment results.
Their critical mass of 'drivers' and their brand are hugely sticky, and massive barriers to entry.
Once Lyft and Uber have made sure that they are the only players, prices will inch up as they de-facto collude together, just like supermarket chains or anything else.
If a new entrant in a city tries to challenge them, they'll price way below market value until that challenger is gone, and then bring prices back up.
Wins and losses will be on a city-by-city basis, so it's possible that some city, somewhere has a 3rd party that wins out. Like maybe in Texas, due to whatever framework some other entity 'won' and came 1st (i.e. 'in Texas we proudly use 'Whatadriver'!), then it's possible for 3rd parties to exist, but the same rules will apply.
This market will settle down, and both Lyft and Uber will cut all of their stupid projects, and then they'll settle into oligarchy type pricing and profits.
As far as valuation, that's difficult to tell, but I think they have very viable business models that are not going away.
Facebook and Twitter could dissapear as quickly as they came, but Uber/Lyft found a back door into a very ancient market and they have their claws in their now, so they are not going away. They'll be around. It's just a matter of valuation at this point.
I will say, when i needed a ride in a more rural area near Seattle, I did go right to Uber, and that driver wasn't on Lyft (but was considering it), so there is some stickiness, but I don't think it's much.
So yes, maybe a 'serious competitor' could try in some city, and as you say maybe 'word would travel fast' and maybe it might be possible to get a critical mass of drivers ... but then Uber/Lyft will just undercut them in a war of attrition.
To your mini-case: maybe there was a few other 3rd parties in existence, but you possibly never even heard of them. And even if the drivers sign up ... without the demand well there's no game anyhow.
It's been commoditized, so the advantage now is scale, brand etc. which the incumbents have, and they have money.
That market is done for now, until something comes from a different angle: new tech, new regulation, public transport shift, self driving cars etc.
It's a commodity, brand doesn't matter. Scale across cities doesn't really help that much. Money helps, but public market investors don't like to see it being spent quarter after quarter.
It's a taxi company. They have a web site and a mobile application, but so does several retailers as well as pretty much every bank out there. And no one is accusing them of being tech companies, or expect their growth to mirror that of Google or Facebook.
If you just look at the business of Uber, it's clear their current business does not inspire confidence that they will ever be profitable, much less deserving of Google-level valuations.
Sure, they may be able to become successful, but that would be on the back of a different business model. But then you'd have to justify why Uber would be able to execute on this as-of-yet-unknown business model better than any competitor.
Taxi companies own taxis, calling uber a taxi company is too simplistic.
Uber Eats revenue was $1.5 billion in 2018, representing an increase of 149% from the $0.6 billion in revenue the food delivery service generated in 2017.
Maybe not the best analogy? eBay and Amazon both started in the 90s and were both HUGE successes for investors.
Auctions was one of a dozen or so large failures on the part of Amazon to find a profit center. eBay wiped the floor with them and Amazon gave up relatively quickly. Since then, eBay has generated over $15 billion in profit in auctions, a figure Amazon struggles to match in its entire retail history despite the scale difference.
All these years later, eBay is generating ~$2.3 billion in operating income and their auction business is under no serious competitive threat (it is a slow growth business however, basically fully saturated). Amazon's huge retail business is only barely able to match the profit of eBay's auction business.
The ultimate value in Amazon of course wasn't retail. For eBay, the value is actually in the ecommerce.
 2001: https://www.zdnet.com/article/amazon-auctions-losing-momentu...
I love this about auctions, it seems to preserve value. Rather than e-waste going for scrap it might go to a collector, upcycler, charity, or specialist recycler.
Since then, eBay has generated over $15 billion in profit in auctions
Example: your item is worth $200 on the fair market, but might only sell one or two a month. There are simply not that many people chasing, say, a Commodore 4040 disc drive or a high-grade 1898 half-crown. You can park it on a Buy it Now listing forever until you get $200. If you try to auction starting at $200, or with a $200 reserve, people will pass because if they're not getting a deal, they'd better at least get immediate gratification rather than waiting 10 days for the auction to close. You can list at $100 or $1 at auction and get interest, but then you're praying people get interested enough to push it back to $200. Buy it now is the safest route for that.
I tend to use eBay these days as "one step above Banggood/AliExpress/etc." They have many of the same items but there will usually be a few sellers offering it dispatched from the US, letting me get it in 3 days instead of 25, for a couple dollars more.
Pretty much everyone who invested before the IPO is up on their money. Lyft’s is not a story of a crap company going public. It’s a story of a crap IPO at the wrong price. JPMorgan priced the stock too high, didn’t adequately surveille for bad short selling, and generally numptied up a straightforward process.
Amazon has a business that is worth an optimistic $150 billion if it were only traditional retail, without AWS and their relatively new ad business. That's assuming a richer valuation than their peers due to expectations of growth.
The real value to Uber is not going to be in the ride hailing. It's going to be somewhere else, spawned out of the original business, riding on the back of the huge network they've put together in some manner. They'll find something else to monetize with richer margins, or they'll never justify a $100+ billion valuation. With everything they might be able to touch with their scale, I'd bet on them finding enough other business opportunities over time (that said, I also wouldn't be a buyer anywhere near the IPO valuation). The $10b IPO will buy them another likely five or six years of additional cash burn. And if they're smart, in the first year after the IPO, they'll dilute again and go get another $5 billion or so. With their need to find another business, their AWS, they can't have enough capital.
Basically I always suspect every IPO to have a period of rising stock prices, and eventually it will dwindle. That's just the way the market works. You can't expect prices to rise indefinitely. Some corrections come sooner than others. I find it much more healthy for Lyft to not have an extreme correction at least.
Note I'm not invested in Lyft or any related company (Uber), I'm just a humble novice investor.
With self driving cars much further away than previously thought, this is the real danger for a company like Uber, who is bleeding money through their standard taxi-like services, quarter after quarter.
So do we know for sure that their e-commerce model will ever be profitable?
Even if you make it a lottery, you will have to make sure everybody who would want to buy at the low price gets equal opportunity to do so.
Finally, I would think the tax department could see selling at a price that you know is significantly below market value as a gift that is taxable.
Tech companies especially have enough employees that own shares and want to sell that liquidity should not be a big issue. This allows the price to be tested while slowly adding volume (as price stabilizes, more employees willing to sell).
Lyft is only active in the US while Uber is spread in many different countries. Unit economics look totally different in NYC, Cairo, and Rio.
 A very small example might be 0 to 60 acceleration in cars. If done by the manufacturing what is the weight of the 'jockey'(driver)? We never know that or I have never seen it (maybe a magazine when testing uses the same driver but I am not talking about that). Yet the weight of the driver does matter. I know that when I drive my high powered but small 'sports car' the car definitely accelerates slower when my wife is in the passenger seat. So an extra X pounds would make a difference in the comparison stats.
"This gap is likely also due to Uber’s heavier international presence (where they now generate 52% of their bookings). It would be interesting to see this data on a country-by-country basis (or, more importantly, a market-by-market one as well)."
yet still proceeds to draw this questionable conclusion:
"Lyft has made impressive progress at increasing the value of rides on its platform and increasing the share of transactions it gets."
All of these directly effect the unit economics of ride sharing.
So if the market price for taxi service in a city is X, already accounting for all those factors, Uber/Lyft should be able to deliver the same or better service for (say) 0.9X, again accounting for the factors but adding in efficiency gains from bypassing parasitical taxi medallion owners, not needing dedicated vehicles, having much easier ordering, etc. There will be some variance in how big that factor is (eg. NYC's $1 million medallions gave Uber a really juicy margin to exploit), but overall, if a city can sustain taxi service, it should be able to sustain Uber/Lyft too.
So if a city wants to kill Uber/Lyft, all they need to do is to attack the rideshare margins directly. (Not that they really should. Uber/Lyft is probably a civic good.)
(taking these graphs as truth) lyft's gross margins were flagging, so it seems they goosed gross margins with opex, like marketing (likely promos) and better customer service (e.g., refunds). they spent their way to higher gross margins so they could look better than uber for ipo.
but as the rest of the analysis points out, lyft is seriously behind uber in the race to overall profitability despite higher per ride take rates. they're still a risky investment in comparison.
I have more incentive to stick with Uber now I’ve read this as the drivers make more (and typically the same driver does both anyway)
Drivers use Lyft because riders use Lyft, and it's better to drive for either at a given time than neither. It doesn't mean Lyft pays equally or higher.
> We derive our revenue principally from service fees paid by our Driver and restaurant partners for the use of our platform in connection with our Ridesharing products and Uber Eats offering provided by our partners to end-users. Our sole performance obligation in the transaction is to connect partners with end-users to facilitate the completion of a successful Ridesharing trip or Uber Eats meal delivery. Because end-users access our platform for free and we have no performance obligation to end-users, end-users are not our customers.
By making this distinction, Uber might be on a path of trying to maximize it's driver/restaurant unit economics and not on the per user metric.
While Lyft also thinks of drivers as their end customer but doesn't clarify the position of end-users like Uber:
> We provide a service to drivers to complete a successful transportation service for riders. This service includes on-demand lead generation that assists drivers to find, receive and fulfill on-demand requests from riders seeking transportation services and related collection activities using our Lyft platform. As a result, our single performance obligation in the transaction is to connect drivers with riders to facilitate the completion of a successful transportation service for riders.
That's some bracing cynicism there. So their business plan is to keep paying their taxi drivers less (with VC money), or providing worse service, until they figure out self-driving cars or run out of money?
"End-users" as defined here are actually the riders/"eaters" of Uber. Uber is saying these people are not their customers because they are just providing access to drivers/restaurants+delivery people with their platform. What Uber is saying is that driver/restaurants/devliery people are independently selling their products/services on Uber as a platform and that end-users (riders/eaters/consumers) are simply given free access.
They may survive, not strapped with the debt, perhaps they’ll be profitable. Aka they will just have debt restructuring. Regardless, that’s when I suspect the bankruptcy will occur.
On the other hand, I don't know anyone outside the US who knows Lyft.
Uber could fail and no-one but its investors would bat an eyelid.
This heading sounds off "Despite Pocketing More, Lyft Loses More per User". Shouldn't that be "Uber loses more…"?
There will be local competitors in every city. There will be pure software companies that build TNC apps and sell operating services. Maybe Vuitton, Apple, Waymo, Herz, Hilton, Star Alliance, Oneworld etc. also have their own mobility service provider networks.
Say 4 billion people, 1% of them do ride-hailing of some kind, every one of them has five ride sharing apps and they pay $0.20 per day for each. That's $15B in revenue total for all those involved.
Try that with Boeing, Intel, or Starbucks.
Who cares what Google shows.