The data shows coronavirus is killing Lyft (NASDAQ: LFYT). For example, Lyft’s quarterly revenues fell from $1.017 billion on 31 December 2019 to $955.71 million on 31 March 2020.
In addition, Lyft’s quarterly operating loss grew from -$381 million on 31 December 2019 to -$415.11 million on 31 April 2020. Meanwhile, Lyft’s quarterly gross profit fell from $514.31 million to $413.29 million in the same period.
However, Lyft’s revenues were still larger in April 2020 than a year earlier. For instance, Lyft reported quarterly revenues of $776.03 million on 31 March 2019. Plus, Lyft’s quarterly operating loss shrank from -$1.157 billion on 31 March 2019 to $414.11 a year later.
How safe is Lyft?
Thus, Lyft is making less money, but grows fast. Lyft’s revenues grew at a rate of 23.15% in the first three months of 2020, Stockrow estimates. However, Lyft’s revenues grew at a rate of 51.9% in the last three months of 2019, and 95.38% in the first three months of 2019.
Therefore, one factor in Lyft’s margin of safety, revenue growth is strong. Conversely, another key safety metric at Lyft, operating cash flow is terrible. Lyft reported a negative quarterly operating cash flow of -$206.93 million on 31 March 2020.
However, Lyft reported an ending cash flow of $1.28 billion on 31 March 2020. Unfortunately, $797.67 million of that cash came from investing, Stockrow estimates.
Finally, Lyft had $2.7 billion in cash and short-term income on 31 March 2020. Thus, Lyft can generate cash but not through its business. Hence, Lyft is a business that is sort of safe.
Is Lyft Overpriced?
I think Mr. Market overpriced Lyft (NASDAQ: LYFT) stock at $31.26 on 29 May 2020.
Conversely, Lyft’s shares have lost about 25% of their value in 2020. To explain, LYFT began 2020 at $43.58 on 2 January 2020, rose to $53.94 on 11 February 2020, fell to $16.05 on 16 March 2020, and finished at $31.26 on 22 May 2020 to $33.75 on 27 May 2020 and $31.26 on 29 May 2020. Therefore, Lyft shares have some stability.
However, I think what people are investing in at Lyft is a business. The business plan is to build a platform that provides transportation services through an app.
Coronavirus threatens that business plan they built Lyft for a society where large numbers of people needed rideshares. For instance, all the drinkers who take a Lyft home from the bar. Those people also include all the business travelers who use Lyft instead of rental cars.
Now, however, people are not going out to bars or traveling for business. Hence, Lyft has no customers and no money.
What Value does Lyft have?
I think Lyft still has value because of its experience in arranging transportation. For example, Lyft can adapt the rideshare app to package hauling.
Moreover, Lyft is exploring new capabilities for its platform. For instance, Lyft drivers are delivering test kits, medical supplies, and meals to the elderly, shut-ins, the poor, and the disabled in some areas. I think Lyft could leverage that capability to build a takeout delivery service to compete with UberEATS, DoorDash, and GrubHub (NYSE: GRUB).
In addition, Lyft could create a prescription delivery service it could market to companies such as Walgreens (NASDAQ: WBA), Kroger (NYSE: KR), and CVS Health NYSE: CVS). Plus, Lyft is experimenting with patient transportation for healthcare providers.
Lyft’s Valuable Platform
I think Lyft’s chief value is in its digital platform. In particular, Lyft (NASDAQ: LYFT) had 30 million riders and two million drivers in August 2019, Expanded Ramblings estimates.
In contrast, Lyft had 22.9 million active riders in 4th Quarter 2019. That number grew from 22.314 million in 3rd Quarter 2019 and 18.6 million riders in 4th Quarter 2018. In particular, Lyft made $42.82 million in revenue from its average active rider on 30 October 2019.
Plus, Lyft provided 178.4 million rides in 4th Quarter 2018, Expanded Ramblings estimates. In contrast, Lyft provided 116.4 million in 4th Quarter 2017.
Lyft is a Risky Theoretical Stock
Impressively, Lyft claimed it could offer rides in 95% of the United States in October 2017. Additionally, Lyft offered rides in 300 American and Canadian cities on 30 October 2019. Thus, Lyft can provide transportation services to most Americans. Finally, 65 million people installed before 1 March 2020.
Theoretically, Lyft’s platform has enormous amounts of value. Unfortunately, Lyft will need to make money with that platform. Thus, Lyft is a risky theoretical stock with questionable money making capacity for the foreseeable future.
In the final analysis, I think investors need to avoid Lyft because I cannot see how this company can make money soon. I conclude Lyft has an excellent business plan that is not working yet. Hence, only those who can afford to lose money can afford to invest in Lyft (NASDAQ: LFYT).
Originally published at https://marketmadhouse.com on May 27, 2020.