When Lyft drove up on the Nasdaq on 29 March 2019, the attention among investors was huge. After all, the San Francisco-based company made its debut on the US technology exchange as a carpooling service. In this respect, Lyft was also a kind of icebreaker for the IPO of industry giant Uber about two months later. The initial euphoria - the first price was 21% above the issue price of USD 72 - did not last long. Instead, Lyft made a downright "U-turn" on the day of the IPO. The downswing was to last almost a year. When the Corona sell-off raged on the stock markets, the share fell to its lowest point so far in mid-March 2020. At USD 14.56, Lyft was only worth around a fifth of the IPO price at that time. Nevertheless, the share was able to make up ground with a bullish Nasdaq in the meantime (see chart).
Lyft has grown strongly in the year of its IPO: For the 4th quarter of 2019, the company reported almost 23 million so-called Active Riders - 23% more than at the end of 2018. In addition to customers who use the driving service or participate in car sharing, the company also counts users who rent a bicycle or scooter via the Lyft app. At USD 44.40, revenue per customer expanded proportionally in the final quarter (see chart). The newcomer to the stock market is on a roll, especially because of its high losses. With turnover of around USD 3.6 bn, the bottom line for 2019 was a loss of USD 2.6 bn. In view of such deep red figures, analysts and investors are probably right to rack their brains as to whether and to what extent such a business model can be operated profitably.
Not surprisingly, Covid-19 did not exactly help dispel the doubts. On the contrary: during the lockdown, the service provider, which is active in numerous US cities and parts of Canada, saw its sales plummet. In the 2nd quarter of 2020, only 8.7 million "riders" were still using Lyft vehicles. Nevertheless, the company managed to reduce its losses significantly by cutting costs. Despite the crisis, CEO Logan Green is sticking to his goal of breaking even on an adjusted basis by the end of 2021. "During the second quarter we saw a recovery in demand," said the top manager and Lyft co-founder. Although this trend has continued beyond June, the company is still in the midst of a recovery. However, the number of passengers in August was still a good half below the previous year's level. Whether those responsible have managed to stem the loss further, however, will become apparent around the turn of the month. Then the company will publish the figures for the 3rd quarter - the concrete date is not yet known.
What is certain is that November 3rd could be a landmark date for the Lyft share. When the USA elect the next president, California will also vote on "Proposition 22". The bill would explicitly exempt mobility service providers from the legal obligation to hire their drivers as employees. In principle, they act as subcontractors. If this status were to change, the sector could face high additional costs, for example in the form of sick pay. In this respect, it is not surprising that the service providers provide financial support for "Proposition 22". Conclusion: The Lyft share is the convergence of megatrends such as sharing economy, autonomous driving, digitalisation or climate protection. Nevertheless, the bumpy ride of the Nasdaq title could continue.
Leonteq offers an investment solution that meets these expectations and the already high volatility with two new Softcallable Barrier Reverse Convertibles. The product starts the 15-months term with a risk buffer of 41%. As long as the underlying asset does not deplete this cushion, the products will generate their maximum return. In CHF, the guaranteed coupon is 16.00% p.a., while the USD variant yields a payout of 17.20% p.a. If a barrier is breached, Lyft can save the outlined yield with a "turnaround". In concrete terms, the share would have to trade at or above the starting level again in order to avoid discounts in the repayment.
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