The losses are just too staggering at buzzy ride-sharing IPOs Lyft and Uber to confidently invest your money, says one market veteran.
“I wouldn’t buy [Uber or Lyft] with your money,” opined Paul Schatz, president and chief investment officer of Heritage Capital, on Yahoo Finance’s The First Trade on Tuesday. Schatz said he prefers to wait several months on a red-hot IPO before considering to get into the stock. “Most hot IPOs see that initial burst of emotion or momentum fade out. I like to wait at least two to four months.”
When it comes to both Lyft and Uber, Schatz probably has a point.
Lyft’s bottom line is nothing to write home about, a factor many on Wall Street (who remain absurdly bullish on Lyft) have seemed to forget. While Lyft saw sales more than double to $2.2 billion in 2018, it lost about $911 million.
The company is widely expected to deliver another staggering loss when it reports first quarter earnings Tuesday after the close of trading. It’s also likely Lyft reports continued slowing in key operating metrics such as bookings, active riders and the amount spent per active rider.
Many on Wall Street — despite the barrage of Buy ratings on the stock — don’t expect Lyft to earn a profit until 2022, at the earliest.
Subsequently, Lyft’s stock has reflected concerns about its losses. At $60.83, Lyft’s stock remains well below its first trade on its late March IPO day of $88.60. The stock is also trading below the $72 a share it was priced at on the roadshow.
Uber’s financial standing is in worse shape than Lyft’s as it eyes its debut on the New York Stock Exchange later this week. Schatz believes Uber and their bankers have learned a lesson from Lyft so the “price will be more reasonable and I don’t think you’ll see an enormous wave of selling out of the gate.”
“I think they run a better company and they got their hands in many more pods than Lyft does,” he added.
The owner of Uber Eats and its eponymous ride-hailing service saw its sales spike 43% last year to $11.3 billion. But, the company lost $3 billion on top of a $4 billion loss in 2017. Overall growth continued to slow in most areas of Uber’s business, too.
Uber’s cash flow from operations the past three years was an outflow of $5.8 billion.
Brian Sozzi is an editor-at-large and co-host of ‘The First Trade’ at Yahoo Finance. Follow Brian Sozzi him on Twitter @BrianSozzi
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