What’s That Revenue Worth, Ride-Hailing Edition

Morning Markets: A final riff on Lyft’s revenue multiple as Uber works towards pricing its IPO.

It’s a big day for IPOs, with Pinterest and Zoom expected to price. But lost in that hubbub is the Uber offering, still working towards its own pricing.

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What I wanted to do this morning was quickly look at how investors are valuing Lyft now that it’s had some more trading days under its belt. We have a few things that are worth playing with, namely a better idea of what the public market thinks that Lyft is worth, and some analyst expectations about how much it will grow this year.1

This means we can price the company a bit, even before it reports its Q1 earnings on May 7th. So, here’s what we know:

• Current Lyft valuation: $16.04 billion (MarketWatch, $16.08 billion, Google Finance)
• Lyft 2018 revenue: $2.16 billion
• Lyft expected Q1 revenue (analyst average): $727.06 million
• Lyft implied, expected Q1 annual run rate: $2.91 billion
• Lyft expected 2019 revenue (analyst average): $3.39 billion

We can now calculate a number of multiples that will help us understand the value of growth-oriented revenue in the ride-hailing space, as of now:

• Lyft revenue multiple, measured with 2018 revenue: 7.43x
• Lyft revenue multiple, measured with Q1 expected run rate: 5.51x
• Lyft revenue multiple, measure with 2019 revenue expectation: 4.72x

The revenue multiples compress as quickly because Lyft is expected to grow quickly. Indeed, analysts anticipate that Lyft will expand about 57 percent this year. Our above math isn’t perfect, of course, as Lyft’s multiples will change once its Q1 revenue is known; that figure will get baked into the company’s valuation, and our trailing revenue metric will no longer be calendar 2018, and so forth.

But what I wanted to do was calculate Uber’s list of revenue multiples using Lyft as a datapoint as it helps us understand how high its valuation might reach. Remember when Uber was rumored to be a $120 billion company at IPO (To that end, remember when $20 billion and $25 billion were only rumored Lyft valuations, and not sums the company reached post-IPO?) Let’s check the math:

• Uber 2018 revenue: $11.27 billion
• Uber’s valuation using Lyft’s revenue multiple using 2018 revenue: $83.74 billion
• Uber’s valuation using Lyft’s Q1 expected run rate revenue multiple: $62.1 billion
• Uber’s valuation using Lyft’s 2019 expected revenue multiple: $53.2 billion

What we can see from our crude math is that unless public market investors decide to value Uber’s revenue far more highly than Lyft’s own, Uber doesn’t get close to the $100 billion valuation mark, let alone $120 billion.

That’s not to say that it won’t manage either of those valuations. Instead, Lyft’s post-IPO performance and current set of revenue multiples merely tell us how hard Uber will have to argue to get the valuation it likely wants.

You have to decide for yourself if Uber or Lyft should be worth more per-dollar of revenue. The argument isn’t hard to make in favor of Uber (global business, huge equity stakes in growth-oriented ride-hailing companies in huge markets, food delivery as top-line lever, etc) or Lyft (smaller gross losses, faster expansion than Uber in recent quarters, global markets are growth opportunities, etc).

Uber’s pricing and its ensuing revenue multiples will tell us a lot. Just as Lyft’s own IPO has been incredible illustrative.

Illustration: Li-Anne Dias.