ShiftPixy vs. Lyft: Which Is the Better Buy?

Shiftpixy stock - ShiftPixy vs. Lyft: Which Is the Better Buy?

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I like to cover businesses that are making money or on a pathway to profitability. ShiftPixy (NASDAQ:PIXY) announced good results April 15, sending PIXY stock higher by more than 5% in early trading.

Here’s a company that provides shift workers and the companies that employ them a platform to take care of business. It’s a win/win proposition.

So, what’s this got to do with Lyft (NASDAQ:LYFT), the United States’ second-largest ride-sharing app (based on market share)?

Well, nothing, if you’re comparing companies in the same industry. However, if you’re interested in owning stocks that have a shot at making money in the near future, Shiftpixy stock is the much better option.

Here’s why…

Lyft Losses Enormous

In fiscal 2018, Lyft’s operating loss was 45 cents for every dollar of its $2.16 billion in revenue. Its IPO prospectus says that it may never make a profit.

We have incurred net losses each year since our inception and we may not be able to achieve or maintain profitability in the future. We incurred net losses of $682.8 million, $688.3 million and $911.3 million in 2016, 2017 and 2018,” stated the prospectus.

Uber is expected to go public next month. It loses 27 cents for every dollar of its $11.3 billion in annual revenue, a slightly healthier number than Lyft. Together, the two ride-sharing apps lose 35 cents for each dollar in revenue.

In Lyft’s case, as it tries to wrestle market share from Uber, its losses are rising, while Uber’s seem to have stabilized.

Still, both could be profitless for the next five years or longer. So, unless you’re a venture capitalist in waiting, might I suggest something like ShiftPixy, which is much closer to break-even and also provides a platform for growth.

ShiftPixy’s Latest Results

The company announced its second-quarter 2019 results on April 15, before the markets opened. They were very encouraging. As I started to write this article, Shiftpixy was up more than 5% in early trading. It’s now dropped into negative territory. Despite the change in direction — the markets as a whole are down — there are some numbers to like from its earnings report.

On the top line, revenues were $13.2 million, 67% higher than a year earlier, and 26% higher than in Q1 2019. Gross billings in the quarter increased by 70% to $82.5 million. ShiftPixy essentially pays the shift workers and generates revenue by marking up the payroll.

In the second quarter, it had 9,660 worksite employees accessing the ShiftPixy platform, up 47% over Q2 2018. The more worksite employees are working with its clients — it had 25 clients as of the end of November 2018 — the more revenue it makes from its platform.

At the end of the first quarter, four of those clients accounted for 75% of its total accounts receivable, down from 86% in Q4 2018. It’s heading in the right direction. Once the 10-Q is out, I’d bet that number would be down into the low 60s.

Profits Soon Enough

In terms of profits, Shiftpixy’s gross margin in the quarter was 24.4% — more than double its 11.1% gross margin in the same quarter a year earlier.

In regard to operating profit, Shipftpixy lost $2.2 million in Q2 2019, 18% lower than a year earlier. That’s 17 cents in losses for every dollar of revenue, about half the amount of Lyft and Uber combined.

Also, in late December, Shiftpixy came to a settlement agreement with certain institutional investors regarding the company’s 8% senior secured convertible notes due Sept. 4, 2019. The agreement reduced Shiftpixy’s liabilities by $2.61 million, which went right to its bottom line, reducing its net loss to $338,531 (considerably less than the $2.7 million in Q2 2018).

In the first six months of 2019, Shiftpixy’s net loss dropped by 61% to $2.3 million from $6.1 million a year earlier.

As it continues to add clients and shift workers to its platform, I’d expect Shiftpixy to turn profitable sometime in fiscal 2020, perhaps sooner.

The Bottom Line on Shiftpixy Stock

Is PIXY stock risky?

At  $1.20 or so, you better believe it. That said, its use of artificial intelligence for onboarding shift workers appears to be gaining traction. Good businesses generally help people and companies make and save money and time.

For that reason, as a speculative play, ShiftPixy holds some appeal. I can’t say the same about Lyft or Uber.

At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.


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