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Uber Needs a Lyft

“Uber and Lyft are caught in a perfect storm of China-trade related market choppiness, combined with worries around no profitability in sight, and a valuation knife-fight between the bulls and the bears.” —Daniel Ives, Wedbush Analyst

They just waited too long. There’s nothing exciting about it. I don’t think you could have expected anything different … the reality is you’re nine years in and you’re still having to buy your revenue. That’s not a good sign.” —Mark Cuban, American businessman

It’s been a bumpy ride for Lyft and Uber as they enter the public markets. Uber is now down 20% from its offer price and Lyft has fallen even more since its IPO. The question is if the weakness in these offerings is fundamental to the long term viability of their respective businesses or if these stocks are caught up in broader volatility and negative market sentiment. Both companies are a long way from being consistently profitable and these are very uncertain times. A trusted Turtle Garage friend, subscriber, and mentor recently said regarding the state of financial markets, “I don’t know about the timing, but the list of things that could go wrong is long. And markets have been priced to perfection. Semper Paratus! Be ready.”

REPOSTED FROM BLOOMBERG MAY 13TH 2019:

Updated on
Uber shares tumble, fast approach ``white knuckle'' zone

While there are plenty of skeptics when it comes to the ride-hailing and ride-sharing economy, the broader market sell-off amid escalating trade tensions between U.S. and China is also weighing further on the valuation of the two companies. Uber CEO Dara Khosrowshahi told staff on Monday that it was “another tough day in the market,” and warned of a weak showing.

Read more: Uber CEO Warns Staff to Gird for Months of ‘Tough Public Market’

“Uber and Lyft are caught in a perfect storm of China-trade related market choppiness, combined with worries around no profitability in sight, and a valuation knife-fight between the bulls and the bears,” Wedbush’s Ives said, noting that Uber’s IPO was initially expected to be a positive catalyst for Lyft. “Once it ultimately became the opposite, it became a field day for the shorts,” he said.

The staggering proportion of bearish bets in Lyft has already become a cause of concern for investors. The stock currently has nearly 62% of its free float held short, according to S3 Partners.

Read more: Lyft’s Hedge Fund Bulls Hold the Keys to Massive Short Selling

Falling to $35 would mean a more than 22% discount to Uber’s IPO price of $45. The stock was seeing heavy trading on its second session as a public company. According to Bloomberg data, the total value of Uber shares traded on Monday was $2.8 billion, surpassed only by behemoths such as Apple, Amazon, Microsoft and Facebook.

For more on Uber’s IPO, check out the Decrypted  podcast:

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One Response to Uber Needs a Lyft

  1. GLK May 14, 2019 at 8:23 am #

    An Eagle was soaring through the air. Suddenly it heard the whizz of an Arrow, and felt the dart pierce its breast. Slowly it fluttered down to earth. Its lifeblood pouring out. Looking at the Arrow with which it had been shot, the Eagle realized that the deadly shaft had been feathered with one of its own plumes.

    Moral: We often give our enemies the means for our own destruction.

    Such is how the USA’s relationship has been with China. Until now.

    China is arguably the least balanced economy in the modern world. Hence, China has to take extraordinary measures to secure their supply chain. This economic dependency is also why China has recently spent so much on military expansion etc., they must protect their vulnerable interests.

    Everything important to the Chinese Economy surrounds their critical need to secure a strong global supply chain of raw material to import, and leveraged trade agreements for export.

    China’s economy is deep (manufacturing), but China’s economy is also narrow.

    China could have spent the time to create a broad-based economy, but the lack of early 1900’s foresight, in conjunction with their communist top-down totalitarian system and a massive population, led to central government decisions to subvert the bottom-up building-out and take short-cuts. Their population controls only worsened their long term ability to ever broaden their economic model.

    It takes a population of young avg-skilled workers to do the hard work of building a raw material infrastructure. Mine workers, dredge builders, roads and railways, bridges and tunnels etc. All of these require young strong bodies. The Chinese cultural/population decisions amid the economic builders precluded this proactive outlook; now they have an aging population and are incapable of doing it. They also rely on a labor workforce from North Korea that few people ever discuss.

    This is why China has now positioned their economic system as dependent on them being an economic bully. They must retain their supply chain: import raw materials – export finished goods, at all costs.

    As things go forward, China cannot sustain a long-term economic conflict with the U.S. As each day passes the Asian alliance will see their investment grow as companies pull-out of China and invest in S-Korea, Vietnam, Philippines, India etc. The GDP of our allies (including Mexico) grows, and the controlled GDP of China, as an adversary, shrinks.

    (LA Times) GoPro Inc. will move most of its U.S.-bound camera production out of China by summer, becoming one of the first brand-name electronics makers to take such action to minimize the impact of the U.S.-China trade war.

    Da Nang, Vietnam – United States Trade Representative Robert Lighthizer released the following statement in response to President Trump’s speech on trade between the United States and the Indo-Pacific region, at the Asia Pacific Economic Cooperation (APEC) CEO Summit:

    “The President spoke loud and clear: the era of trade compromised by massive state intervention, subsidies, closed markets and mercantilism is ending. Free, fair and reciprocal trade that leads to market outcomes and greater prosperity is on the horizon.

    “President Trump understands that too many nations talk about free trade abroad, only to shield their economies behind tariff and non-tariff barriers at home. The United States will no longer allow these actions to continue, and we are willing to use our economic leverage to pursue truly fair and balanced trade.”

    Moral: The American Eagle is no longer going to be crippled by an arrow feathered by its own stupidity, no matter the spin displayed by the sufferers of Trump Derangement Syndrome.