Uber & Lyft – No good news.

The ride-sharing market remains in difficulty

Uber Q4 2020 – Sheep in FedEx clothes?

• Uber is fortunate that it has had a delivery business to help it weather the pandemic, but this raises the possibility that it should be compared to FedEx and UPS when it comes to valuation rather than the inflated technology sector.
• Uber reported in line Q4 2020 results with revenues / EPS of $3.17bn / LOSS$0.54 compared to consensus at $3.56bn / LOSS$0.55.
• Bookings and user numbers were also broadly in line with forecasts.
• Ridesharing continues to be a drag with bookings in Q4 2020 falling by 50% YoY as lockdowns once again swept the globe.
• Deliveries posted 224% growth YoY but still lost an enormous amount of money with EBITDA coming in at a loss of $145m bringing total losses for the quarter for Uber to $968m of which $236m were stock-based compensation and non-cash.
• Uber has plenty of cash to see it through this period, but this figure has fallen substantially during 2020.
• On 1^st Jan 2020 Uber had $12.1bn on its balance sheet which has fallen by $5.3bn in 12 months despite a net increase in debt of $1.0bn ($2.6bn raised and $1.6bn paid off).
• This means that Uber has burned through $525m a month during 2020.
• The exit run rate for 2020 is less than this average figure but still heavily negative with a difficult outlook for 2021.
• Uber is now a delivery company meaning that one should look at Uber at least partially on that basis.
• Uber is currently trading on 7.1x 2021 EV / Revenue while FedEx is on 1.2x 2021 EV / revenue and UPS is trading on 1.9x 2021 EV / revenue.
• Uber is not faster-growing at the moment nor does it have a stable earnings stream and so this premium looks to be too high in my opinion.
• This is a “technology” stock trading on dreams rather than fundamental reality making it another one to avoid.

Lyft Q4 2020 – Precariously balanced.

• Lyft reported good results relative to expectations, but its financials still reveal a very difficult environment where brutal competition looks set to emerge the minute the pandemic slump lifts.
• Q4 2020 revenue / EPS were $570m / LOSS$1.43 where revenue fell by 44% YoY but an active cost program managed to trim some of the losses.
• The company still burned through $265m in cash from operations in Q4 2020 and $1.4bn for the year, demonstrating how drastic some of the cuts have been.
• Lyft does not have a delivery business to help offset the fall in ride-sharing, and the outlook for recovery is very uncertain given how the pandemic is progressing.
• I think that Q2 2020 will see some recovery with more to follow in Q3 2020 but Q4 2020 is a complete unknown given that the virus that causes the COVID-19 disease is extremely seasonal in nature.
• Lyft is trading on 2021 EV / Revenue of 5.5x which I think is still too high even the precarious nature of this business, its uncertain outlook and the brutal competition that is likely to resume once the pandemic is under control.
• Lyft is the weaker player in the key US market and is likely to have to increase spending again once Uber gets its teeth back into the ride-sharing market.
• Hence, I think that profitability in Q3 is very unlikely, which will disappoint the market.
• I would continue to steer clear of the shared economy and ride-sharing in particular.