Ride-hailing platform Lyft (NASDAQ:LYFT) reported results that overall beat analyst expectations but guidance of more big losses in 2020 likely spooked the market.

The stock is down about 5% in after-hours trading demonstrating investors do not like the slowing growth and an expectation of continued big losses in 2020.

Revenue came in at $1.02 billion, 3% better than consensus of $984 million and management guidance of $980 million.

Revenue growth of 52% decelerated from last quarter’s growth of 63% demonstrating a maturing ride-hailing market even though Lyft is benefitting from less driver and rider discounts.

Riders on the platform hit 22.9 million, up 23% from last year which is slowing growth from the 28% growth in riders Lyft posted last quarter.

Management guided to $470 million of EBITDA losses in 2020.

At this rate the company won’t break even until 2022, longer than the 2021 profitability target currently being floated by management.

Earnings this quarter did nothing to pull Lyft out of its holding pattern in our opinion. We need to see cashflow and EBITDA (a proxy for cashflow) losses shrink for at least 2-3 quarters in a row before we would get much more constructive on the stock.

Competition in the ride-hailing space is fierce, and we have no way of knowing how profitable or unprofitable Lyft can ultimately be.

Lyft is still on very uncertain footing with deepening losses. U.S. Ride-hailing companies, including Uber and Lyft, are benefitting from a short-term cease-fire in the price wars that may not last. With about three years of cash left at the current burn rate, Lyft still offers less compelling value than a more diversified Uber or better yet any of the true SAAS tech stocks.

There is nothing to get excited about with Lyft and Uber at this point.

Yes they are growing relatively quickly for the car manufacturing business, but growth is nothing special for companies who bill themselves as tech stocks.

If they can turn the EBITDA losses into EBITDA gains, then valuations start to look more interesting.

Even Tesla at an eye-watering $780/sh doesn’t look so overvalued next to Uber and Lyft with their steep losses.

Ride-Hailing Compared to Car Manufacturing

2020 EstimatesPrice/SalesRevenue GrowthEBITDA Margin 
Lyft3.1x29%-15%
Uber3.5x39%-15%
Tesla4.4x21%16%
Honda.34x2%8%
Ford.25x-1%7%

Uber vs Lyft Compared

Uber is making a bet that Eats and other businesses Lyft does not have will contribute to better growth AND margins.

Uber and Lyft currently look very similar.

Longer term the only big difference will be in the growth rates and profit margins.

Uber is making a bet that Eats and other businesses Lyft does not have will contribute to better growth AND margins.

Though both companies are guiding to a profit in 2021, these estimates are at risk.

Lyft in particular only has the ride-hailing business which is maturing, and though there is a slowing in discounting right now, price competition could pick back up again which would cause Lyft’s losses to balloon again.

Key Metrics (Uber vs Lyft)

UberLyft
Rider Growth YoY26%28%
Quarterly Revenue YoY42%63%
Operating Margin YTD-37%-34%
2020 Price/Sales Estimate3.5x3.1x

Below is our view of where the buy and sell signals are for Lyft stock.

The stock isn’t worth more than $88 by 2020 in our current outlook and based on the output of our tool, the current stock price of $54 is still too expensive.

The stock needs to fall below $30 to become interesting in our view given the headwinds from employee-friendly regulations in the U.S. and uncertainties around profitability.

Grizzle’s Guide to Trading Lyft

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