Shares of Lyft (LYFT) are little changed after the ride-sharing company reported its first quarterly report since going public in late March.
The stock is down almost 20% from its IPO price and more than 30% from its opening price on the day of its IPO. Sentiment is decidedly negative on Lyft despite the company's strong top-line growth because of its sizeable net losses and unclear path to profitability.
Lyft reported encouraging results last night, reporting a smaller than expected net loss on higher than expected revenue. The company also guided for a smaller than expected second quarter and fiscal 2019 EBITDA loss on higher than expected revenues for both periods.
For now, the results do not appear to be enough to shift sentiment, especially ahead of the IPO of its larger rival Uber (UBER), which is expected to price tomorrow evening.
Lyft reported a first quarter GAAP net loss of $1.14 bln including nearly $900 mln of stock-based compensation and payroll tax expenses related to the IPO.
The adjusted first quarter net loss of ($9.02)/share and adjusted EBITDA loss of $216 mln actually beat estimates.
Lyft's adjusted EBITDA margin improved to (28%) from (60%) in last year's first quarter. The contribution margin (selling price per unit minus the variable cost per unit) improved to 50% from 35%, and the sales and marketing expense as a percentage of revenue fell to 29% from 42%.
On the call, management said that it was encouraged by the strength in its core business.
Perhaps most importantly, Lyft said that the current competitive environment has improved recently. The market, said management, is becoming more rational, with rider incentive pressures receding amid presence from two large players in the space.
Management also said that investments in insurance initiatives can have a very high ROI to reduce costs.
Lyft said that its losses will peak this year. Management reiterated that they see a path to profitability in the core ride-sharing market, but bikes and scooters will add to losses.
Management also announced that ten of Alphabet's (GOOG/L) Waymo self-driving cars will launch on the Lyft network in Phoenix, Arizona during the second quarter. Waymo, said to be in the lead with respect to autonomous driving technology, is already testing its self-driving cars in the Phoenix market, where a safety driver will still be on board monitoring each trip. Alphabet's VC unit CapitalG has a 4% stake in Lyft. General Motors' (GM) self-driving unit Cruise raised $1.15 bln from Softbank, Honda, and its parent company at a $19 bln valuation this week. GM has a more than 6% stake in Lyft.
Much can be debated about how the ride-sharing market will evolve in a world with autonomous driving. While still seemingly years away, that technology would dramatically reduce driver costs but also increase competition in the ride-sharing market. Lyft's independent network would likely become strategically more valuable as Uber has its own self-driving ambitions.
Investors are more focused on the near-term financial results. Lyft forecasted 53% revenue growth for the year, which is excepted to slow from 103% in 2018 and 95% in the first quarter as the company laps price increases from the second quarter of last year.
With a $17 bln valuation, the 5x sales multiple is far cheaper than some recent technology IPOs, mostly enterprise software companies with similar growth but a much cleaner path to profitability.
Staring Friday, Lyft's much larger rival will also be publicly traded, so the ride-sharing story is just getting started for public market investors. At the high end of its expected IPO range, Uber would command a $91 bln valuation and trade at a modest premium to Lyft in terms of its sales forward sales multiple.
Lyft is focused on the US and Canada alone while Uber operates globally. That has allowed Lyft to gain domestic market share in recent years. Uber is also reporting sizeable losses but slower top-line growth as it invests in its more mature ride-sharing business, food delivery, logistics, and autonomous driving.