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LYFT caused quite a stir when it held its IPO in March. The offering was quickly oversubscribed (as is Uber’s), and shares eventually hit the market at $87.24 – well above the company’s $72 per share offer price.

Initial public offerings tend to start with a bang – stock often rockets higher before settling down; as Lyft’s did when it closed its first day of trading at $77.75. It only took one more session to drop below its $72 offer price, and the rout has continued ever since. At the time of writing, Lyft is trending 30% below its offer price, languishing sub-$60.00.

More pain incoming for Lyft stock?

It seems that owning a piece of a unicorn that is yet to make a profit but is valued at over $26 billion quickly lost its shine. Tech IPOs are always exciting, because everyone hopes to end up holding a piece of the next Facebook, but so far Lyft looks more likely to follow in the footsteps of Snap Inc, which has never come anywhere close to reclaiming 2017’s starting price and is currently 62% below it.

Profitability is the key issue. Ride-hailers like Uber and Lyft may have disrupted the traditional taxi market, but so far they are burning through cash fast. In its IPO filing, Lyft revealed that it made a net loss of $911 million in 2018, up 23% from 2017. However, revenue was growing faster, with 50% growth to $2.2 billion recorded last year.

Markets will be looking to see whether Lyft can continue the rapid pace of revenue growth, while those losses need to be reined in. A slower pace would be a good start, but really markets want to see that number reversing as the company hopefully moves towards profitability. Will management offer any guidance regarding a timeline for that?

The stock will live and die on those expectations; growing market share or increasing revenue per ride will mean nothing if the company keeps piling up the losses.

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