Expanding Globally: Lyft's Ambitious Growth Plan
Lyft, the popular ridesharing company founded in 2012 by Logan Green and John Zimmer, made a significant move in March 2019 with an Initial Public Offering (IPO) that raised $2.34 billion. Since then, the company has been focusing on various strategies to cement its position in the market and expand its operations.
Focusing on Underpenetrated Markets
Lyft is concentrating its efforts on growing in underpenetrated markets, which represent 2/3 of the Total Addressable Market (TAM) across North America. Cities like Charlotte and Indianapolis are seeing growth rates above 30%.
Expansion into Europe
The company has announced its expansion into Europe, marking a significant step towards becoming a global mobility platform. While Lyft has not publicly announced specific European cities for the expansion of its ridesharing services, it has cooperated with Baidu in Europe, hinting at potential collaborations.
Partnerships and Collaborations
Lyft has been forming strategic partnerships to fuel its growth. Notable partnerships include United Airlines and DoorDash, the latter of which has been an exceptionally strong partnership for Lyft, offering a strong value proposition.
In addition, Lyft has cooperated with May Mobility to launch autonomous vehicles (AVs) in Atlanta, and has plans to collaborate with May Mobility in 2025, followed by other Autonomous Vehicle (AV) opportunities with Baidu, Benteler, Mobileye, and Maruben in 2026.
Autonomous Vehicles as an Opportunity
While the autonomous vehicles sector presents a significant risk, Lyft management views it as an opportunity. They see AVs as a very exciting opportunity and are confident about Lyft's prospects in this field.
Financial Projections
Lyft's management expects about $1 billion of free cash flow in the trailing 12 months and a similar adjusted EBITDA to free cash flow conversion in 2025. They are also confident about executing insurance cost strategies in line with, or slightly better than, the observed inflation trends in the industry.
The management thinks the outcome in 2026 will be well above the latest June 2024 Investor Day targets. Lyft is on track to print a $100 million booking rate by the end of 2025 for its ad business.
Stock Buybacks and Valuation
The last quarter saw the first significant amount, $237 million, of stock buybacks. The company is significantly undervalued and, even conservatively, worth at least 25%-30% more than the current share price level in the $20s.
Challenges and Risks
Like any corporation of this size, Lyft faces usual execution risks. However, the regulatory risks have declined as people are taking ride-hailing as the new normal. Globalization efforts lessen Lyft's risks broadly.
Looking Ahead
The user penetration rate is projected to be 23.5% in 2025, while it is expected to reach 28.7% by 2030. With a strong focus on innovation, a robust partnership portfolio, and a global expansion strategy, Lyft is seen as an exciting turnaround story, having everything ready for the next phase of growth.
In April 2023, Lyft announced layoffs of 1,076 corporate workers, a move aimed at streamlining operations and focusing resources on growth initiatives. Despite this, the company is prepared to lead the company to become a leading player on a global scale in the dynamic and rapidly evolving Mobility on Demand sector.
Lyft (NASDAQ: LYFT) is poised for an exciting future, with the revenue in the ride-hailing segment within the broader Mobility on Demand market expected to reach $179.70 billion by this year.
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