Lyft IPO is making waves, followed by a flop

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Although the group hosted what everyone assumed was very hot, the Lyft IPO did not go as planned. Although the company's stock starts were strong on Friday, April 1 was less promising as Lyft's share price fell by almost 12% in one day. It is now well below the target price, which casts doubt on the financial viability of the mobility companies.

It's a complicated question. At its IPO last week, Lyft accounted for more than $ 22 billion. However, investors are concerned about the company's inability to make a profit. Last year, the running giant recorded a net loss of nearly $ 1 billion. As Uber is about to announce its own IPO soon (and probably faces similar headwinds), many are worried.

If the question of profitability is important, it is not the only reason why the company is having trouble negotiating. Mobile businesses are no longer a novelty and people are beginning to point out the disadvantages. Environmentalists and town planners worry more and more about the fact that the sudden arrival of Uber and Lyft vehicles in urban areas has contributed greatly to traffic congestion and pollution. Studies also indicate that these companies have excluded many customers from public transit.

However, this could also be the main asset of the companies. Lyft and Uber grow rapidly and see more runners every day. And all that growth has been expensive. Neither company has a clear path to becoming profitable. While both suggested deploying autonomous vehicles, reducing the need for independent contractors and their cars, the development of the technology proved to be extremely expensive and far less simple and fast than the automotive industry. predicted. As a result, public confidence that audiovisual vehicles will be reliable, safe and useful has not improved much.

In the run-up to the Lyft IPO, many of these companies reported being overvalued, which is not uncommon in the technology sector. But going public has changed things. Instead of relying on venture capital and the positive press, Lyft will have to start appeasing its shareholders, opening the door to a series of problems. They will be less likely to support the company if it continues to lose money and, given its long-term aspirations, the loss of money may be lost for some time to come.

CNBC quoted Michael Ward, an analyst at Seaport Global Securities, who initiated coverage of the stock with a sales note and a 12-month price target of only $ 42 per share. Lyft evaluated its IPO on Thursday night at $ 72. Ward's price target suggests a 39.1 percent reduction from the $ 69 announced Monday.

"In order to justify its current valuation of the market, investors must believe in them that millennia and generations later renounce the ownership of a car and opt instead for a carpool service," he said, adding that his personal belief is that people will continue to own cars and rely on ridesharing services as a "hands-on supplement".

"While we believe the carpool market will continue to grow and we rely on Lyft to be a competitive choice, we believe the current valuations reflect an overly optimistic view of consumer behavior in the US," Ward said. .

Nobody really knows if Uber and Lyft will disappear, completely replace taxis or become so widespread that they will effectively replace public taxis. and personal transport (doubtful). But many agree that the two companies will have to adjust their prices to become profitable – an interesting situation, given their competitive cost and convenience, gives them an advantage over taxis, while helping disruptive start-ups to keep passengers away. trains and buses.

[Image: Jonathan Weiss/Shutterstock]

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