In the past 6 months there’s been a feeding frenzy around ride-sharing stocks that have gone public. For anyone who doesn’t know, Lyft is one of several ride-sharing companies that provide ride-sharing services for individuals and businesses throughout the U.S. and Canada.
Consumers love these companies because of the fixed cost of traveling from one destination to another. Unlike metered cabs which have dominated the market for over 30 years, Lyft gives the consumer the ability to know ahead of time the cost of the trip and allows them to pay for it without having to use cash. It also allows consumers to travel directly to areas that are not always accessible by other modes of public transportation.
Here is an important question: Is Lyft, Inc. (LYFT) profitable? Since going public on Friday, March 29th, 2019 the stock has gone from a high of $78 to as low as $56. In 2019, Lyft reported top-line revenue of $776 million on losses of $1.14 billion due to IPO-related expenses. Therefore, if you are tempted to buy Lyft shares, then you shouldn’t. I am hopeful that in the future Lyft can stop losing hundreds of millions of dollars per quarter. If loses diminish in the future, at some point I might consider Lyft shares a buy.
Very often certain companies become extremely popular in the media. Don’t confuse popularity with profitability. Never get sucked into the media vortex.
It is important to remember if you want to be successful in the stock market, underlying top-line and bottom-line fundamentals are what’s important.