SimilarWeb provided a glimpse into Lyft’s driver daily active users in Q2 2019. The report revealed a decline of 18% in Q2 ahead of earnings today. The data does not account for riders; however, it does require caution as fewer daily drivers is likely to trickle down to less revenue.
Lyft is a native application only and does not operate a website. Native app data from companies like SimilarWeb tends to be accurate in this case. I’ve seen some data not translate if the company also has website traffic, such as Pinterest or Facebook.
Install penetration YoY has also slowed, according to SimilarWeb.
SimilarWeb has access to more data than they publicly disclosed to Yahoo – likely for liability purposes. The company has visibility into app rank and rider daily active users, as well. Therefore, a leak to Yahoo Finance from an unbiased third-party that directly precedes earnings is something I tend to take seriously. SimilarWeb’s business model is to sell data to investors. There is no guarantee Lyft will miss earnings today, however, SimilarWeb will see a material impact either positively or negatively if the data they release is seen as accurate.
Quick Notes on Uber:
- Arianna Huffington and Matt Cohler stepped down from board positions – not common this soon following an IPO
- Uber laid off 400 employees in marketing, or about 1/3 of the team, which was announced at the end of July
According to MarketWatch, Uber is expected to report losses of $3 billion this quarter due to stock-based compensation from its IPO. Lyft is expected to report losses of half a billion dollars. Fundamentally, this is unprecedented for a company at the $65 billion market cap level. If either company pulls off earnings this quarter, I don't think the rebound will last long.
My original analysis on these two companies was during the euphoria of April 2019 when the market was confident Lyft and Uber would perform well. I wrote an analysis that went against the bullish sentiment before Lyft dropped 20% following the IPO and before Uber became the worst IPO performance in history. The issues that I pointed out still remain:
- Subsidizing of Rides: Venture capital is typically used for product development and for human capital to help the company scale. In a rare twist of startup mechanics, venture capital for these two companies was used to drive market demand by using the capital to lower the price of the ride-share. The result is artificial supply and demand, and it’s uncertain what demand will be when the ride is no longer subsidized with venture money. This should have been solved prior to going public and prior to the companies reaching balloon-sized valuations.
- The lockup expires in November and I agree with the theory that Uber and Lyft are liquidity events. Look for the true valuation of these companies in the two years following the lock-up period. While I do not expect an immediate dump, there will be a noticeable unwinding as more shares become available, and the stock price undergoes dilution. If you want to bet on these companies long term for autonomous vehicles or another thesis, then you will have much better opportunities for entry after the six-month lock-up period. (I am personally betting against these companies into Q1 and Q2 2020).
You can access my previous analysis on the public blog:
https://beth.technology/lyft-risky-intellectual-property/
https://beth.technology/uber-ipo/
https://beth.technology/uber-stock/