More detail takes the shine off Lyft

Using thia updated information the expected enterprise value at the mid-price is $19.6bn. We are assuming around $3.27bn in net revenue in FY19 which translate into a 12-month forward EV/Sales ratio of 6x which is quite aggressive given the lack of profitability and potentially long runway to profitability factoring full costs of employee stock options.

Given that we are late into the economic cycle it’s our view that the Lyft IPO represents a poor risk-reward ratio for the investor. There are ingredients in this IPO that could disappoint investors over the coming year.

Key risks

While Lyft is an interesting growth story in a new emerging industry (on demand ride-sharing) there are some key risks to consider. The company has made losses every year since inception and the company may not be able to achieve or maintain profitability in the future according to the S-1 filing. In addition competition is intense and costly to maintain.

The company seems to have chosen not share key metrics such as churn rates and acquisition costs on new customers but also drivers. In essence we observe less transparency than in other IPOs from US technology companies. Our worry is that the company is not disclosing this information because the story is likely not that good.