To The Moon

Today’s deep dive is on $Lyft, Inc.(LYFT)$ and $Uber(UBER)$ . This is an unusual spotlight because it highlights two companies, but given the similarities in their business models, I think it’s appropriate to cover them in a basket. I’ll explain below why I think owning both is the proper strategy, rather than betting on one over the other.

Started in 2009, Uber offers ride-sharing, food delivery, and freight services to businesses and consumers around the world.

Started in 2007 and rebranded as Lyft in 2013, Lyft offers ride-sharing and some food delivery in the United States and Canada.

Why Stock Lyft and Uber? In ~100 Words

Ride-sharing is a “winner-take-most” market that lives by the laws of the smiling curve. The company that develops a leading position by attracting the most supply and demand will extract most of the value in the market and be extremely difficult to topple. In today’s market, that’s Uber.

However, autonomous vehicles may change the industry’s dynamics.

As autonomous vehicles proliferate, I think we are seeing a plethora of potential autonomous vehicle technology companies and vehicle manufacturers, which means the market won’t be won by a single company disrupting Lyft and Uber (like $Alphabet(GOOG)$ $Alphabet(GOOGL)$ Waymo or $Tesla Motors(TSLA)$ ). Instead, autonomous vehicle supply will be commoditized, ultimately replacing human drivers through individually owned vehicles or small fleets, and in ride-sharing, the winners will be the aggregators of ride-sharing demand — Uber and Lyft.

Uber’s Key Stats

Uber by the numbers:

• Company: Uber

• Ticker: UBER

• Market Cap: $126.2 billion

• Revenue (ttm): $41.96 billion

• Gross Margin: 32.7%

• Operating Margin: 6.4%

• Net Income: $4.4 billion

• Shares Outstanding and Y/Y Growth: 2.15 billion, up 2.2%

• Earnings per share: $1.20

• FCF (ttm): $2.11 billion

• Date Founded: March 2009

• Founder: Garrett Camp, Oscar Salazar, and Conrad Whelan (Travis Kalanick was initially an advisor)

Uber’s Leadership:

• CEO: Dara Khasrowshahi joined as CEO in September 2017 after Kalanick was pushed out following public scandals.

• Note: The founders are largely absent from Uber’s leadership and Board of Directors today.

Lyft’s Key Stats

Lyft by the numbers:

• Company: Lyft

• Ticker: LYFT

• Market Cap: $5.9 billion

• Revenue (ttm): $5.46 billion

• Gross Margin: 33.9%

• Operating Margin: -2.9%

• Net Income: -$65.3 million

• Shares Outstanding and Y/Y Growth: 404.2 million and 7.0%

• Earnings per share: -$0.17

• FCF (ttm): $641.3 million

• Date Founded: 2007 as a college carpooling company. The current version of Lyft was launched in 2013.

• Founder: Logan Green and John Zimmer

Lyft’s Leadership:

• CEO: David Risher has been CEO since April 2023 and joined the board in July 2021. He was SVP of U.S. retail at Amazon and was a GM at Microsoft.

• Both Logan Green and John Zimmer remain on the Board of Directors.

The Strategy

Both Uber and Lyft are ride-sharing companies connecting drivers (supply) with riders or deliveries (demand). In other words, they’re the modern taxi dispatch companies, except on a global scale.

To win in this 2-sided market, they need to attract both supply and demand at scale. If one has more scale than the other, it will “win” the market by pulling the other, which is why Uber is worth 21x what Lyft is worth. Uber succeeded in holding off the threat by Lyft by focusing on the supply side, attracting drivers with incentives, and giving bonuses, which will become important in the future.

What’s changing today is autonomous driving and its impact on the market. That’s where I see the potential for the industry to grow 10x in size. And there could potentially be a power shift from Uber to Lyft.

By covering both stocks here, I’m betting on the growth of this part of the autonomous vehicle stack and getting exposure to both the incumbent and the laggard. I’ll explain below why both could win long-term.