A Lyft IPO Could Happen This Week...

Written by Jennifer Clark
Posted March 27, 2019

It’s happening this week… Lyft will be making its initial public offering (IPO). Some never thought this day would come. The company has spent the last six years becoming a service that the U.S. is familiar with, while setting itself apart from its much larger competitor Uber.

Lyft provides transportation to those who don’t or can’t take public transportation. The company's app connects its drivers to customers quickly and conveniently, providing over one million rides per day in 300 U.S. cities. As of the end of last year, the company made up 29% of the ride-hailing market in the U.S. Since its founding by Logan Green and John Zimmerit in San Francisco in 2012, Lyft has transformed itself into a massive, well-known business.

Back in June 2018, after a funding round, the company was valued at $15 billion. Now with its upcoming offering, it could have its valuation shoot even higher to $23 billion. So Lyft plans to set its shares at $62 to $68.

In 2018, Lyft’s revenue was $2.16 billion — double the previous year, which is always good to see. Growth in revenue is important. However, if losses are also growing, that’s not good. In 2018, the company reported a loss of $911 million, up from its $688 million 2017 loss. That is a significant bump, and it could keep growing as it takes its business international and attempts to become more than just a ride-hailing company.

However, just because Lyft isn’t profitable doesn’t mean I don’t see a profitable and successful IPO for the company. Again, we’re talking about one of the most identifiable businesses in the U.S. We know that it has a high valuation because of its six years of funding, but, in the long term, it may not have a sustainable future. It could start to have some serious financial issues if it continues on the same path.  Not to mention, who knows if the ride-hailing market will still be a thing in a few years? Trends come and go, and ride-hailing apps could be one of those trends. Or, another innovative company could come along and improve the industry.  

There’s a lot to consider when investing in these types of tech companies, especially when it comes to market debuts. The idea of getting shares in the very beginning and having that company skyrocket is very appealing. But it’s sometimes not worth the risk if you are an ordinary investor who is looking to use your retirement or savings to invest in these hyped up tech IPOs. Observing the company during its first year of trading and understanding its financials throughout that year would be more beneficial. If the time comes and you still feel strongly about investing in the company and see that it has strong financials and a good plan for growth, then I say go for it.

Lyft’s market debut will most likely have a successful first day of trading. Its success — along with the success of Levi Strauss & Co.'s IPO last week — will unleash a wave of IPOs.

Until next time,

Jennifer Clark
Pro Trader Today

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