Lyft IPO is a pure bet on the US ridesharing market

IPO could come next month

By CNN BUSINESS' SARA ASHLEY O'BRIEN CONTRIBUTED TO THIS REPORT
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1. Looking under Lyft's hood: Lyft appears to have beaten Uber in the race to become the first US ridesharing company to go public.

The Lyft IPO, which could come next month, may serve as an icebreaker in the frozen IPO market. US offerings have plunged -- largely as a result of the longest government shutdown in American history.

Investors will soon get a look under Lyft's hood. After submitting its IPO paperwork confidentially with the SEC late last year, Lyft is expected to make the filing public as soon as this week, The Wall Street Journal reported.

The documents will give Wall Street a glimpse into whether Lyft is worth the $25 billion valuation it's reportedly seeking. The key questions include how close Lyft is to achieving profitability, how fast the company is stealing market share from Uber and what risks these companies face.

Lyft's IPO filing will show how, unlike Uber, it's squarely focused on the booming American ridesharing market.

"Lyft is much more a bet on a pure-play US ride-sharing market," said Asad Hussain, emerging tech analyst at PitchBook, a research firm that covers private capital markets. "It's a cleaner growth story."

It's true that Lyft has dipped its toes into bikes and scooters, including by acquiring bike-sharing operator Motivate.

But Uber, the more mature company reportedly seeking a valuation of up to $120 billion, is spending heavily to expand into overseas markets and new areas like delivery (Uber Eats), shipping (Uber Freight) and micro mobility with services like the JUMP electric scooters.

Uber's strategy could pay off by making it a one-stop shop for all transportation needs. But it also poses risks and puts downward pressure on Uber's margins.

"Lyft is staying away from the untested markets like delivery and freight. That presents a much clearer growth story to investors," said Hussain.

Even though ordering an Uber has become commonplace for many Americans, ridesharing itself remains a relatively untested market.

"We haven't seen how it performs during a downturn. When you add all of these other things, it muddies the water," said Hussain.

Financial results released earlier this month show that Uber lost $1.8 billion in 2018, compared with a loss of $2.2 billion the year before. But the results also show that Uber's revenue growth decelerated sharply as well.

The Lyft IPO story doesn't come with the baggage that has surrounded Uber. Over the past several years, Uber has been gripped by countless scandals including sexual harassment, alleged gender discrimination and a drawn-out boardroom battle with founder and co-CEO Travis Kalanick.

For all of these reasons, Lyft is likely to garner a richer valuation than Uber.

2. Fourth-quarter GDP: On Thursday, the Bureau of Economic Analysis will release a long-awaited estimate for gross domestic product in the last quarter of 2018.

The scheduled release last month was delayed by the government shutdown, because BEA wasn't open when it would normally be gathering and analyzing all the data that goes into calculating economic growth. After a blockbuster second and third quarter, which came in at 4.2% and 3.4% respectively, economists expect a more subdued number — forecasts currently range from the Atlanta Fed's 1.4% to the New York Fed's 2.35%.

3. Powell speaks to Congress: Federal Reserve Chairman Jerome Powell will testify in a House Financial Services Committee meeting and at a Senate Bank Committee hearing this week.

Powell has tried to calm markets over the past couple months by suggesting the Fed will stand pat on rates. President Donald Trump has criticized Powell and the Fed for raising interest rates over 2018.

4. Retail earnings: Some of the country's biggest retailers will tell Wall Street this week how they performed during the holidays.

Home Depot and Macy's report quarterly earnings on Tuesday, while Best Buy, Lowe's, and L Brands come on Wednesday. JCPenney, Nordstrom, and Gap land on Thursday.

Investors' expectations are high for all of these companies. The economy is strong and retailers make an outsized chunk of their sales during the holiday stretch. Wall Street will be looking for any cracks in their businesses or signs of a slowdown.

5. Coming next week:

Tuesday — Home Depot, Macy's, Papa John's and JM Smucker earnings, Powell appears before the Senate Banking Committee

Wednesday — Lowe's, Best Buy and Campbell Soup earnings, Powell appears before House Financial Services Committee

Thursday — GDP report, JCPenney, PG&E, Gap, Nordstrom Marriott and Anheuser-Busch earnings

Correction: An earlier version of this story misstated dates for Powell's testimony and Marriott's earnings

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