Uber/Lyft S-1 Comparison: A Tale of Five Charts

Commentary3 years ago
Transportation giant Uber finally filed to go public after months of market speculation and rumors. Here are our takeaways from the S1.
On Thursday afternoon, transportation giant Uber finally filed to go public after months of market speculation and rumors. Here are our first takeaways after combing through its 3,000+ page S1.

Its TAM figures should probably be ignored.##

  • Total addressable market (“TAM”) is one of the first things investors tend to focus on when assessing high-growth, long-tail businesses like Uber
  • Across its three primary target markets (rideshare, trucking, and food service), the total implied value of the market opportunity that Uber is pitching investors represents $12 trillion – or nearly 15% of the entire world’s GDP in aggregate
Uber TAM

While historical growth has been very strong, recent quarters tell a different story, with sequential growth turning negative in the last quarter of 2018.##

  • This is especially notable since the fourth quarter is known to be a seasonally strong quarter for ridesharing businesses (holiday and business demand)
  • The third quarter is conversely a seasonally weak quarter (peak vacation season in many cities)
  • This combination of dynamics should make posting Q4 growth a very low bar to hit, which Uber didn't
Uber QoQ

We believe this negative trend is largely attributable to pressure on Uber’s take rate.##

  • Uber has consistently undercut Lyft on the portion of driver bookings it keeps, known as “take rate"
  • That delta has only increased in recent quarters as Uber and Lyft took two different approaches in shoring up their books pre-IPO
  • We believe Lyft was more focused on improving profit metrics, while Uber was more focused on managing supply/demand, resulting in the two divergent take rate trajectories we’ve observed:
Uber Take Rate

This downward trend should negatively impact gross margins, but because of different reporting practices, Uber’s gross margins actually appear higher.##

  • This is just one of the many frustrating inconsistencies in reporting standards that we encountered as we combed through the Uber’s S1
  • Slight differences in reporting standards (as well as poor disclosures on many key financial metrics) make it difficult to properly model the business and make key comparisons we believe investors should be focused on
Uber Gross Margin

Despite being 5x the size of Lyft, Uber’s profit trajectory does not appear to have as significant a lead on Lyft as we would expect.##

  • Over the last 8 quarters, Lyft has steadily made inroads on closing the margin gap between itself and Uber
  • We believe Uber’s focus on other, non-ridesharing verticals is the major contributor to this dynamic
  • Its take rate on its food delivery business, for instance, is less than half its take in core ridesharing markets
Uber Operating Margin

Finally, it has something important to say to Lyft:##

Uber S1 Excerpt
As of this writing, UBER was a portfolio holding of Titan. This security may cease to be a portfolio holding at some point in the future.

Become a Titan investor today.

Investment articles and resources
Become the smartest investor you've ever been through straightforward, easy-to-read investment articles.
Titan Global Capital Management USA, Inc ("Titan") is an investment adviser registered with the Securities and Exchange Commission (“SEC”). By using this website, you accept our Terms of Use and Privacy Policy. Titan’s investment advisory services are available only to residents of the United States in jurisdictions where Titan is registered. Nothing on this website should be considered an offer, solicitation of an offer, or advice to buy or sell securities. Past performance is no guarantee of future results. Any historical returns, expected returns [or probability projections] are hypothetical in nature and may not reflect actual future performance. Account holdings are for illustrative purposes only and are not investment recommendations. The content on this website is for informational purposes only and does not constitute a comprehensive description of Titan’s investment advisory services.
Refer to Titan's Program Brochure for more information. Certain investments are not suitable for all investors. Before investing, consider your investment objectives and Titan’s fees. The rate of return on investments can vary widely over time, especially for long term investments. Investment losses are possible, including the potential loss of all amounts invested. Brokerage services are provided to Titan Clients by Apex Clearing, an SEC registered broker-dealer and member FINRA/SIPC. For more information, see our disclosures. Information provided by Titan Support is for informational and general educational purposes only and is not investment or financial advice.
© Copyright 2022 Titan Global Capital Management USA, Inc. All Rights Reserved.