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Analyst: Uber is 'learning from the Lyft lesson' for its IPO

As Uber prepares to join the long list of 2019's IPOs, the ride-hailing company has Lyft (LYFT) to watch as an example of what not to do.

"I think Uber’s taken a much more careful approach to coming out of the gate ... learning from the Lyft lesson,” Wedbush Analyst Ygal Arounian told Yahoo Finance’s YFi AM.

Arounian explained that Lyft may have been “in a little bit of a tough position trying to beat Uber out of the gate” and “may have overpriced a little bit.”

Lyft, the smaller of the two ride-hailing services, priced its IPO at $24.3 billion. Since hitting the Street, Lyft’s valuation has dropped to $19.8 billion.

"You’ve heard Uber come down from their $120 billion valuation, and now they’re in the $80 to $90 billion [range],” Arounian said. “We came out with a $100 billion valuation price target on it going forward. So I think they’ve taken some of those lessons to heart and are pricing accordingly.”

A driver with placards for both Lyft and Uber waits for a traffic light outside South Station in Boston after picking up a passenger on Jun. 15, 2017. (Photo by Lane Turner/The Boston Globe via Getty Images/photo inverted by Yahoo Finance)

The question of ride-hailing profitability

Asked about profitability, Arounian said Uber is poised to quell any questions of profitability based on its size alone.

"Lyft is much smaller, it’s domestic-only, it’s ride-share-only,” Arounian said. Uber, on the other hand, “is already global. They’re already playing for an $8 trillion market.”

He explained how, even in the areas where the company doesn’t lead the ride-hailing market, Uber holds stake in various players.

The number one question that Arounian said he gets when big tech goes public is about the path to profitability. He noted that Uber’s size and market gives it leverage in a crowded market.

“Discounting is a huge thing,” Arounian said. “Uber came out, stated really clear in their filing that they’ll discount as long as everybody else is discounting. They’ve raised a lot more capital than anybody else has, and they could be competitive for longer than anybody else.”

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