When it comes to the Uber and Lyft IPOs, I’m sure the financial media will be full of talking heads with opinions on both. That’s fine. But lost in all of it will be an even more promising future. Over the long term, these two companies point us to one major trend (and investment theme) — the growth of autonomous vehicles and the emergence of “robo-taxis.”
Unless you truly love driving, there will be no need to own a car in the future. Auto sharing will be the next-generation way to “own” cars. You will use an app to request that a car come pick you up and take you to your desired destination.
That’s no different than what Uber and Lyft already do today. The difference is that the cars will arrive without a human driver. The autonomous vehicles will take you to where you need to be, and they will come back to take you home when you are ready.
In the future, taxis will be these “robo-taxis.” And a study conducted by UBS shows that their cost per mile will be about 80% less than that of a traditional taxi.
You can see why Lyft and Uber are both in prime position to benefit from the massive and life-changing shift to what I call Transportation 2.0.
In fact, the two ride-sharing giants are already embracing the future — though they have very different models when it comes to implementing the new technologies.
Two Approaches to the Same Race
Uber is set on developing its own self-driving technology that it will use in its fleet of vehicles. As a matter of fact, the company is close to accepting a $1 billion investment from Toyota Motor (NYSE:TM) and its largest shareholder, Japanese telecom business SoftBank Group (OTCMKTS:SFTBY). The huge infusion of cash would be put to work in Uber’s autonomous vehicles unit (which is currently losing money).
Assuming Uber continues along that path, Lyft will likely be first in bringing an AV ride-hailing service to market. It has said it wants to act as an “open platform” for self-driving providers.
Lyft partnered with the world leader in automotive software — which my Investment Opportunities subscribers have a stake in — and began offering self-driving public rides in the test market of Las Vegas in May 2018. The cars provide rides to more than 1,600 entertainment venues, restaurants and destinations throughout the city. They drive themselves until entering a property, at which point the driver then takes control until it is back out on public streets.
So far, the numbers are encouraging. The companies say they have provided more than 30,000 rides with an average rating of 4.95 out of five stars.
Lyft’s partnerships don’t stop there. General Motors (NYSE:GM) invested $500 million in the ride-sharing company in 2016 and today owns more than 18.6 million shares.
General Motors owns self-driving car company Cruise Automation, one of more than 50 businesses with a permit to test autonomous vehicles on public roads in California. Together, Cruise and General Motors are ramping up to launch Cruise Anywhere, their own version of a ride-hailing app.
CEO Kyle Vogt has also said he is open to working with other companies “if that’s the best way to release this technology and achieve the societal benefits of driverless cars sooner.” Considering General Motors’ ownership stake in Lyft, that seems like a very logical possibility. The company’s goal is to launch autonomous vehicles for ride-sharing services as early as this year.
The Right Early Investments for Autonomous Vehicles
We’re seeing the very beginnings of the trillion-dollar shift to Transportation 2.0 — and this trend could easily be headlined by the likes of Lyft and Uber.
Lyft, which launched its pre-IPO “road show” this week, is scheduled to start trading on the NASDAQ next Friday, March 29, under the symbol “LYFT.”
Assuming all goes according to plan, Lyft will become the first-ever U.S. ride-hailing company to go public. Then Uber — the biggest name in the industry today — plans to make its initial public offering (IPO) in April.
Even with all of the attention surrounding these long-awaited market debuts, these are the not the companies you want to invest in to stake your claim in the self-driving mega-trend. At least, not yet.
Both Lyft and Uber are not currently profitable. Now, that isn’t the end of the world. Most early-stage companies take years to turn their first profit as they reinvest in growing their businesses. However, it does make things trickier when analyzing an IPO.
Lyft wants to fetch a valuation of up to $23 billion when it enters the stock market. And Uber will be seeking much, much more… a valuation upwards of $120 billion!
Despite their obvious similarities, the two companies do have their differences. Uber has expanded internationally and diversified itself into other areas of the market, like food delivery. Lyft, on the other hand, is all about ride sharing – which actually makes it a simpler bet.
That being said — I’m staying away from both IPOs for now. I rarely buy any right away. For instance, right now I am focusing a lot on recently public marijuana companies, which I typically watch for a period of time, then identify the right time to buy. (And timing really is everything: Our first recommendation gained 95% in less than four months.)
That doesn’t mean there will never be a time to buy Lyft, Uber or both. I hated Facebook (NASDAQ:FB) in its early years — I want to see a company start making money. Now it’s in much better shape, and I expect it to remain a technology giant for years and years to come.
As we watch Lyft and Uber, we are much better off investing in companies that will supply the next-generation robo-taxis. Rather than trying to pick the winner of the industry, we can make money off the companies that will benefit no matter what.
I’ve recommended several such companies to my Investment Opportunities subscribers. The most recent came just two weeks ago, so I can’t give you all of the details here. I can say it is a big player in supplying computer chips for autonomous vehicles, and it is already up about 20%!
The disruption of this industry is just now beginning. It will lead to trillions of dollars moving from the old to the new. Smart investors will make the right moves now and ride as much of the coming wave as possible.
As autonomous vehicles go mainstream, I’m absolutely convinced their adoption will pay off for early investors at incredible rates of speed. If you can claim a small stake in the companies developing this technology now, you could benefit from one of the rarest, most powerful economic forces in history.
I’ve spent hundreds of hours analyzing the industry, and you can get all my research on this mega-trend — including the absolute best AV stocks to own today for big profits tomorrow — by clicking here to learn more.
Matthew McCall is the founder and president of Penn Financial Group, an investment advisory firm, as well as the editor of Investment Opportunities and Early Stage Investor. He has dedicated his career to getting investors into the world’s biggest, most revolutionary trends BEFORE anyone else. The power of being “first” gave Matt’s readers the chance to bank +2,438% in Stamps.com (STMP), +1,523% in Ulta Beauty (ULTA), +1,044% in Tesla (TSLA), +611% in Liquefied Natural Gas Limited (LNGLY), +324% in Bitcoin Services (BTSC), just to name a few. If you’re interested in making triple-digit gains from the world’s biggest investment trends BEFORE anyone else, click here to learn more about Matt McCall and his investments strategy today.