It is the moment a lot of investors have been waiting for. It is finally time for the Silicon Valley unicorns and ride-sharing giants to make their market debuts.
Uber – the biggest name in the industry today – plans to make its initial public offering (IPO) in April.
But Lyft, the smaller, more centrally-focused of the two, launched its pre-IPO “road show” this week. The stock 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.
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.
I’m sure the financial media will be full of talking heads with opinions on both IPOs. That’s fine. But lost in all of it will be how the future looks even more promising. 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.
The Future Is Now
Autonomous vehicles (AVs) use advanced electronics and computers to drive themselves.
This concept has actually been around for decades. You’ve probably seen plenty of AVs in sci-fi shows and movies.
However, it’s only in the past 10 years or so that technology has advanced to the point that it’s possible to build and operate a self-driving vehicle.
I realize the idea of a car that drives itself is unsettling to some. If there is no way that you would ever let a car without a driver take you to work, you are not alone. There have been a few polls that show about three-fourths of Americans are not likely to ride in a self-driving vehicle. And according to Axios, President Donald Trump recently called the AV revolution “crazy” and said that he’d never let a computer drive him around.
Innovation is often difficult to imagine beyond a few years. But the people who can grasp where the world will be in the next decade are the innovators disrupting industries right now around the globe. And investors who see this playing out are the ones who stand to make a whole lot of money.
Hello. That’s us.
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 do today.
The difference is that the car will arrive without a human driver. The AV will take you to where you need to be, and it will come back to take you home when you are ready.
In the future, taxis will be “robo-taxis.”
A study conducted by UBS shows that the cost per mile for a robo-taxi 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.
Two Approaches to the Same Race
I give them credit. The two ride-sharing giants are already embracing the future, though they have very different models when it comes to implementing the new technologies.
Uber is set on developing its own self-driving technology that it will use in its fleet of vehicles. In fact, San Francisco tech website VentureBeat recently reported that the company is close to accepting a $1 billion investment from Toyota Motor (TM) and its largest shareholder, Japanese telecom business SoftBank Group (SFTBY). The huge infusion of cash would be put to work in Uber’s AV 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 (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 AVs 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 in the ride-hailing business. Considering General Motors’ ownership stake in Lyft, that seems like a very logical possibility. The company’s goal is to launch AVs for ride-sharing services as early as this year.
The Right Early Stage Investments
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.
Another small ride-hailing company, Gett, also announced intentions to go public later this year following Lyft’s announcement. It is expected to debut in either London or Israel, but CEO Dave Waiser said he wants to see how the Lyft IPO goes before making any final decisions.
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. 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!
I’m staying away from both IPOs for now, but I rarely buy any right away. Even with my Cannabis Cash Calendar system, which focuses on recently public marijuana companies, I typically watch stocks for a period of time before identifying the right time to buy. (Our first recommendation is up 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 (FB) in its early years until it started 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 AVs, and it is already up more than 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.
P.S. I believe the coming AV revolution is one of the biggest investment opportunities we’ll ever see.
As autonomous vehicles go mainstream, I’m absolutely convinced their adoption will create huge fortunes 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.
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