๐ Lyft Stock Falls Over 35%, What's Happening?
Lyft's publicly traded shares fell over 35% today(!) & are down 70% over the last 12 months. Will the #2 ridehailing company survive? Its NYC TLC business is more critical than many may think
Both Uber and Lyft have been publicly-traded companies since their initial public offerings (IPO) in 2019. While both company stocks are down from their IPO offerings, Uberโs share performance is beginning to stabilize. The same cannot be said for its American archrival Lyft, whose stock fell more than 35% today (๐), on the back of disappointing financial results and guidance.
Lyftโs stock price has declined precipitously over the last few years.
๐ Down 80%+ since IPO
๐ Down 70%+ in last year
๐ Down 5%+ this year
While the overall stock market and tech-centric NASDAQ had a rough 2022, Lyftโs performance is notably troubling. In this article we briefly explore why Lyftโs stock is likely struggling, what the future may hold for the #2 NYC for-hire transport base, and why its NYC business is more critical than many think.
Why Is Lyftโs Stock Down?
While Lyftโs financial results shows healthy revenue growth and the company has adequate cash reserves (for now), it continues to run large losses. In addition, Lyftโs performance will be compared to its direct rival Uber, whose leading market position, global reach and diversified business (rides, food delivery, etc) is outperforming Lyft on several metrics.
What maybe surprising is that in Q4 (October to December 2022) of last year, Lyft actually achieved its highest revenue in company history! However, investors often react to โguidanceโ around financial performance. In its latest financial disclosure, forward financial guidance and certain disclosures / reinstatements around insurance accounting likely proved disappointing or confusing to many investors.
Lyftโs NYC TLC Business
If we look at the most recent publicly available data, Lyftโs NYC TLC trip market share has actually increased, as one time competitors Via & Juno shut down in NYC. However, Uber clearly remains the dominant player with an over 70% market share of high-volume for-hire trips and over 55% share of ALL NYC for-hire transportation trips, including yellow cabs.
Thereโs some pretty noteworthy inferences we can make from TLC data.
If Lyft roughly has a 25% market share of all high-volume NYC for-hire trips, itโs likely facilitating, on average, about 160,000 daily trips per day in NYC. If we then assume, the average NYC Lyft trip is $20 (excluding government related taxes & fees), then we can do some illustrative financial math.
Based on this (**illustrative**) math, if Lyftโs total 2022 revenue was $4.1 billion, it implies its NYC ridehailing business makes up between 5% to 10% of its TOTAL revenue. Furthermore, since NYC TLC drivers and fleets pay for commercial liability insurance, and insurance premiums are a core cost for Lyft outside of NYC, the profit contribution of Lyftโs NYC TLC business may be significant. ๐ค
Will Lyft Be Acquired?
With Lyftโs stock falling out of favor and increasingly diverging from Uberโs, many are speculating that Lyft might be a prime acquisition target.
Some potential acquirors could be delivery giant DoorDash (i.e., merging Lyft with DoorDash would create an Uber-like competitor) or even auto manufacturers / self-driving companies (i.e., GM, Tesla, Waymo could expand their mobility offering via Lyftโs network). Of course, this is all speculation. Uber acquiring Lyft will likely face immense regulatory scrutiny, so that deal is unlikely to happen (you never know though!).
Why Donโt Drivers Acquire Lyft?
Given how critical Lyft is to NYC TLC drivers and vice versa, as shown above, developments at Lyft should be closely followed by TLC drivers. Perhaps, as we once proposed, drivers could even collectively acquire a large portion of Lyft shares at these all-time lows? (Note: NOT financial advice).
Itโs an idea not too dissimilar from what The Drivers Cooperative (Co-Op) is trying to achieve, except it takes a shareholder activist approach towards an existing business vs. starting a new business.
โโฆMany NYC TLC (a/k/a rideshare), delivery drivers and other NYC โgig economyโ workers have had enough. There are many legitimate complaints that NYC TLC drivers and other self-employed contractors working for app companies have about how these companies operate. From โguilty, until proven innocentโ deactivations to confusing earnings discrepancies between what a passenger pays and what a driver receives, the complaints are based in genuine frustrations.
For example, while drivers appreciate that Uber and Lyft provide a lot of trip volume, 20%+ commissions seem high, especially when drivers are still on the hook for car expenses, insurance and other costs. Companies like The Drivers Cooperative are trying to change the status quo, by creating a driver-owned ridehailing platform, hoping to collapse the โmiddleman economicsโ of platforms like Uber. Another prominent mechanism of pushback is as old as the labor movement itselfโฆforming a union. The idea being that hundreds of thousands of NYC TLC drivers and other gig economy workers can make their demands heard effectively as a collective. As you saw with the recent yellow taxi medallion driver strike, the power of unions (or union-like) organizations shouldnโt be underestimated.
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We believe that an educated and open minded person can often turn their hatred or skepticism of Wall Street โtypesโ and tactics into tools that they can use to facilitate change. In addition, these tactics are not unethical or illegal. If drivers owned shares in Uber and/or Lyft, they could get a seat at the table. In addition, there would be a financial incentive for all parties involved to reach agreeable outcomes. For example, if drivers are happier, driver turnover goes down which in turn reduces driver marketing and incentive spend, increasing profits for all shareholders, including drivers.โ
- AutoMarketplace (February 2022)
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