I read a funny article about Slack’s (NYSE:WORK) direct listing recently that ridiculed the IPOs of both Uber (NYSE:UBER) and Lyft (NASDAQ:LYFT). I won’t get into the details. Suffice to say, the writer wasn’t pulling any punches when it came to Uber stock.

The author, Bryan Menegus, wrote an entire article in May about just how bad Uber stock is. Entitled Congratulations to Uber, the Worst Performing IPO in U.S. Stock Market History, Menegus laid out some of the reasons why he thinks Uber stock is a hopeless cause, including the fact analysts believe the ride-hailing app company might not become profitable until 2024.

“In terms of percentage losses, Uber’s dip doesn’t even scratch the surface of the worst IPOs. But the staggering valuation of the company makes it, in raw scale, ‘among the top 10 IPOs ever’ including companies outside the U.S.,” University of Florida professor Jay Ritter told Gizmodo in a phone interview. “That single digit decline resulted in an estimated $617 million paper losses.”

You’re speaking to the choir, Bryan.

On May 9, I wrote a piece for InvestorPlace that recommended investors NOT buy Uber  on its first day of trading following Uber IPO because it was likely to open significantly higher than its IPO price of $45.

In my defense, I was basing my observation on a potential valuation of between $80-90 billion. Uber’s IPO valuation came in at $76.5 billion, well below what analysts were expecting, and significantly lower than the high-end, pre-IPO valuation of $120 billion.

Missing a target by as much as 36% is a cause for concern and a big reason why investors put the brakes on.

What Does This Have to Do With Wayfair?

It never ceases to amaze me how many investors will invest in companies that lose money. Call a company a “disruptor” and all logic goes out the window. Who cares how much money it loses?

CNBC named Uber to its 2018 “Disruptor 50” list, ranking it second behind only SpaceX, Elon Musk’s space business. While the CNBC piece talked about the great things happening at Uber, it finished by gushing over the amount of money ($21 billion) the company had been able to raise to that point in its history.

But a company is not a disruptor because it’s able to raise $21 billion in venture capital funding; that only makes it well-connected and good at raising capital. That’s the extent of it.

For companies to be successful disruptors, shouldn’t they have to prove they can make money? I’m not a techie, but if someone gave me $21 billion, I’m confident I could come up with something extraordinary that disrupts the world.

Which brings me to Wayfair (NYSE:W) and its similarity to Uber.

Wayfair is a company that can do no wrong, despite the fact it has lost $1.1 billion over the past five years selling furniture and household goods online.

For every dollar of sales over this period, Wayfair’s operating loss came in at 6 cents. In 2018, it generated $6.8 billion of sales. Yet its operating loss was $473 million or 7 cents per dollar of revenue, slightly worse than its five-year average.

Furniture Today editor-in-chief Bill McLoughlin discussed disruptors in a May 2017 article.

“The most seismic impact of disruptors, whether they’ve been successful or failed, is that every shopping experience has to be as elegant as Joybird, as extensive as Wayfair,” said Blueport Commerce CEO Carl Prindle. “The seismic disruption model is Uber and Pinterest and sites like those. Furniture retailers are expected to be as good as all of those.”

McLoughlin goes on to discuss how Wayfair uses technology and logistics to deliver a first-rate experience for customers, including a top-notch home delivery operation.

That’s great in theory, but companies still have to make money or their disruption will end up in the dust bin of history.

The Bottom Line on Uber Stock

Like Wayfair, if you’re high on Uber, I’m sure you can find analyst commentary and Uber news to convince yourself that this so-called disruptor will make money some day.

And perhaps it will.

However, Wayfair’s been on its current path since 2011, and it’s yet to come anywhere close to making a profit. In the first quarter of 2019 it lost $193.6 million on$1.9 billion in sales. So the idea that Uber, which loses a lot more than Wayfair, is one or two quarters away from striking it rich is pure folly.

I wouldn’t own Uber stock or Wayfair regardless of the disruptive nature of their business models because, in my opinion, they don’t have clear pathways to profit.

This long into a bull market, betting on money losers is a recipe for disaster.   

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