The purpose of making an investment is to earn a profit. There’s an increasingly broad consensus saying Lyft (NASDAQ:LYFT) can’t do it. If these analysts are right about LYFT stock and other big tech names, the current social media explosion is in its 1999 moment, waiting for market reality to set in before a lot of companies go the way of Pets.Com, Webvan and TheGlobe.
Lyft plans to announce first-quarter “earnings” on May 7 and bad news is expected, a loss of $1.09 per share, or about $300 million. The hope is that this can be cut by one-third, to about $200 million, by the third quarter of 2020.
If that’s the hope, how bad is the reality?
Self-Driving Over a Cliff
Lyft reported about $500 million in cash at the end of December, but it raised $2.34 billion on the IPO, enough to sustain about two years of losses at the present burn rate.
Unfortunately, analyst Ali Mogharabi of Morningstar says, it will take Lyft three years to turn a profit.
Meanwhile, Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) and a host of other companies are racing to put self-driving cars on the road. Mogharabi called this “the single greatest threat investors should be aware of.” That is a strange statement, because Lyft shareholders are also being told that self-driving cars are their greatest profit opportunity.
Lyft’s work at building an open self-driving platform is prominently displayed on the company’s web site. It made its first moves into self-driving in 2017, under Luc Vincent, previously with Google. (Note that he was with the Street View team, not the self-driving car company now known as Waymo.)
So far, Vincent has put 300 people to work, put a Ford (NYSE:F) Fusion hybrid car on the road and bought Blue Vision Labs, a London start-up working on augmented reality, for $72 million. He also got $200 million from Magna, an auto industry supplier.
Vaporware
I’ve been getting paid to follow internet companies since 1985 and we have a word for this kind of thing. The word is vaporware, as in something that is being touted but doesn’t exist. Lyft is working on self-driving, but that’s the difference between Lyft and Theranos. Theranos claimed to have its problems solved. Lyft doesn’t claim that.
Meanwhile, Lyft would like to rent you an electric scooter. Or try a bicycle — Lyft is America’s largest bike-sharing service. Or it was until it had to pull its electric bicycles from Washington, San Francisco and New York because of problems with the brakes.
There is no doubt that Lyft and arch-rival Uber, which is also about to go public and whose S1 is also hilarious — it burned through $997 million last year while handing executives $172 million in stock — have changed the face of cities. Until recently, every poor kid in my town was riding around, free, on an Uber Bird scooter. Good times. Then the city regulated them out of existence. The kids are walking again.
The Bottom Line on LYFT Stock
It would not surprise me if Lyft delivered an “upside surprise” when it reports on May 7. Maybe it will lose less than $1 per share. Maybe it will lose just 90 cents per share. If that happens, analysts are going to be on TV, pounding the table for this stock.
Lyft went public in March so, as the song says, wake me up when September ends. That’s when employees can cash in on all their “stock.” That is when the lock-up period ends for employees and big holders like General Motors (NYSE:GM), with its 35.7 million shares.
If you’re looking to date the end of the present dot-com like mania, book Sept. 28.
Dana Blankenhorn is a financial and technology journalist. He is the author of a new mystery thriller, The Reluctant Detective Finds Her Family, available now at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or follow him on Twitter at @danablankenhorn. As of this writing he owned no shares in companies mentioned in this article.
