Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche


Will Coronavirus Kill LYFT and Uber?

Many investors are asking will Coronavirus Kill LYFT and Uber. We are asking that question because both Lyft (NASDAQ: LYFT) and Uber Technologies Inc. (NYSE: UBER) lose money.

However, both American rideshare giants have cheap stocks and huge numbers of riders. For example, Business of Apps estimates there were 3.9 million Uber drivers who provided over 10 billion rides in 600 cities worldwide in 2018. In comparison, Lyft had 30 million riders and two million drivers in August 2019, Expanded Ramblings estimates.

Yet both Uber and Lyft were cheap on 3 April 2020. For instance, Mr. Market paid $22.82 for Uber and $22 for Lyft on that day. Hence, many people will consider these ride share giants values.

Lyft Loses Money

Investors are skeptical of Lyft because it loses money. In fact, Lyft, reported a -$356.05 net loss, a -$46.19 negative operating income, a -$93.11 million negative investing cash flow, and a -$121.21 million negative ending cash flow for the last quarter of 2019.

However, Lyft reported $1.017 billion in quarterly revenues and a $514.21 million quarterly gross profit on 31 December 2019. Conversely, Lyft reported a -$381.81 operating loss on 31 December 2019.

Interestingly, Lyft had cash and short-term investments of $2.85 billion on 31 December 2019. Notably, Lyft’s cash and short-term investments fell from $3.116 billion on 30 September 2019.

Thus, I think Lyft is losing money at a time when most of the restaurants and bars are closed because of Coronavirus. Hence, nobody is calling Lyft for a ride home after a night of drinking. In addition, fewer people are taking Lyft to the airport or the train station for business trips and nobody is going on vacation.

What Value Does Lyft Have?

Lyft reported total assets of $5.691 billion on 31 December 2020. In contrast, Lyft had total liabilities of $2.837 billion on the same day.

In addition to its drivers and app. Lyft owns some interesting subsidiaries; Flexdrive, Blue Vision Drives, Leo, Me. Inc. Halo Cars Inc., DataScore Inc., and Corral Labs Inc. Flexdrive is a car leasing company.

Halo Cars offers targeted outdoor advertising through LED screens on top of vehicles.  Blue Vision Labs is an augmented reality startup that works with Lyft’s Level 5 autonomous car division.

Leo Me is a disappearing app they designed for one-on-on and group conversations. Corral Labs provided on-demand rideshare solutions. DataScore is a predictive analytics company that specializes on customer acquisition and retention.

Therefore, Lyft owns a lot of software that could have some value. However, Lyft has a core business coronavirus can kill.

How Much Money is Uber losing?

Dramatically, Uber (NYSE: UBER) reported a -$1.091 quarterly net loss and a -$921 million quarterly operating loss on 31 December 2019.

Predictably, Uber reported a -$1.799 billion operating cash flow, a -$711 million investing cash flow, a -$83 million financing cash flow, and a -$2.574 billion ending flow for the quarter ending on New Year’s Eve 2019. Therefore, Uber is burning incredible amounts of cash.

However, Uber did report a $2.142 billion gross profit on revenues of $4.069 billion for the same quarter. Therefore, Uber can run large amounts of cash through its till. Unfortunately, Uber burns cash at an incredible rate.

Uber is a Cash-Rich Company

Yet, Uber is a cash-rich company. In fact, Uber had $11.412 billion in cash and short-term investments on 31 December 2019.

Interestingly, Uber’s cash stash grew by nearly $5 billion during 2019. To explain, Uber had $6.473 billion in cash and short-term investments on 31 December 2018.

Given those numbers I have to wonder if Berkshire Hathaway (NYSE: BRK.B) could buy Uber. Warren Buffett admitted he considered a $3 billion in investment in Uber in 2018. Moreover, Buffett is a fan of Uber’s management.

“I’m a great admirer of [Uber CEO Dara Khosrowshahi],” Buffett told CNBC’s Squawkbox in May 2018. “Some of the reported details are not correct but it’s true that Berkshire had discussions with Uber.”

Moreover, Buffett is talking about a “big acquisition” and Ycharts estimates Berkshire Hathaway had $128 billion in cash and short term investments on 31 December 2019.

Notably, Mr. Market gave Uber a $40.82 billion market cap on 4 April 2020. Therefore, Berkshire could buy Uber. Remember, Uncle Warren loves cash and Uber generates it.

What Value Does Uber Have?

Uber could be in trouble because it shut down its delivery service in June 2018. Thus Uber is not in a position to cash in on the online delivery boom coronavirus is triggering.

However, Uber has a secret weapon that could help it prosper through the Coronavirus Pandemic. That secret weapon is Uber Eats which saw a 10% jump in business between 17 March 2020 and 24 March 2020, The Information claims. In addition, Uber Eats saw a 30% in new customer sign ups.

To explain, Uber Eats is a delivery service that hauls takeout meals from kitchens to customers. Hence, people can use Uber Eats to satisfy their cravings while obeying stay at home orders.

How Uber could Cash in On Coronavirus

In addition, they could quickly expand Uber Eats to haul prescriptions, groceries, liquor, and other items to customers. For example, Khosrowshahi could restart the Uber Rush delivery service and use it to put all the Uber drivers who have no riders because the restaurants and theaters are closed to work.

In particular, Uber could help Amazon (NASDAQ: AMZN), Kroger (NYSE: KR), and Walmart (NYSE: WMT) keep up with all the additional orders. Remember, Uber now has tens of thousands of drivers who need work and income. Meanwhile, Amazon and others have piles of orders they need to fill. Notably, Uber and Lyft have worked with Walmart in the past.

Obviously Lyft could do the same thing. Notably, New York City’s government wants to hire out of work, Uber, Lyft, and taxi drivers to deliver meals to the elderly, shut-ins, and the disabled, Business Insider reports.

In addition, Bloomberg claims Amazon is hiring Lyft drivers to deliver groceries. The report states, Bloomberg will pay Lyft drivers to shop for groceries and deliver groceries to customers.  Moreover, Bloomberg claims Amazon and Lyft have a partnership to deliver groceries. I guess the partnership is similar to Uber’s defunct arrangement with Walmart.

Hence, Uber’s platform which connects customers and drivers could be worth a fortune in today’s world. Notably, people have to stay home, but they still have to eat, fill prescription, and order stuff. Thus, rideshare drivers can still find lots of work as delivery people.

Lyft and Uber are Worth More than You Think

Thus, I think Lyft and Uber are worth more than most people realize. Uber in particular has a lot of great technology including self-driving vehicle experiments.

My prediction is that both Lyft and Uber will survive coronavirus. However, I think both companies could be acquired. I think buying Lyft or Uber could be a smart move for an automaker such as Ford (NYSE: F). Notably, Ford $34.65 billion in cash and short-term investments on 31 December 2019.

Thus, Ford could buy Lyft or Uber and fold that company into its self-driving car efforts. Hence, there is value at Lyft and Uber.

However, I think investors need to avoid Lyft and Uber stock because I do not think either company could survive on its own. Thus, Lyft (NASDAQ: LYFT) and Uber (NYSE: UBER) have no margin of safety. Consequently, ordinary investors who need a return on their money must avoid Uber and Lyft.