Dear Reader,
I think Lyft is just about fairly valued. At Price/Sales ratio of 2.49 Lyft might even seem an attractive proposition. However, Lyft lost the staggering 2.6 billion USD on 3.62 billion USD in revenue in 2019.
Some analysts question even whether Lyft is a viable business. In 2018 Lyft's net profit margin was negative circa -50%. I still think Lyft is a viable business and can even become profitable by simply raising prices the way Netflix did. Lyft is a discounter in the ride services by charging lower prices for lifts compared to taxis. Netflix first dominated the market for video streaming and then started raising prices and ultimately became profitable, be it mildly though. Lyft could basically do the same. The market for ridesharing is an oligopoly between Uber and Lyft.
All in all, I believe Lyft is fairly valued with a lot of upside potential if the net profit margin of Lyft, which is currently negative, starts improving in the next 3-4 quarters.
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Petar Vladimirov
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Petar Posledovich
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