Lyft Priced at $72 a Share
The crux of Lyft’s success story rests in an all-to-believable idea: That the next generation of would-be drivers will pass on car ownership and instead use ridesharing for daily needs. An econometric analysis suggests otherwise.
In fact, the regression analysis found “little difference in preferences for vehicle ownership between Millennials and prior generations once we control for confounding variables. In contrast to the anecdotes, we find higher usage in terms of vehicle miles traveled (VMT) compared to Baby Boomers.”
Why is this so important? Lyft’s sales pitch hinges on the idea that the company is poised to seize on a sea change in consumer behavior. But if that change isn’t afoot, the stock could be in serious trouble.
At the IPO price, Lyft trades at over 6 times expected sales. As IPO Edge explained in this analysis, the company faces serious hurdles to ever achieving profitability, including its swelling insurance costs. Investors should look both ways.
John Jannarone, Editor-in-Chief