Lyft’s $20 Billion Stock Valuation: What You Need to Know

By March 26, 2019trading

In case you’ve been hiding under a rock, there’s big news in the rideshare world. Lyft is officially going public with an expected initial public offering (IPO) date of March 28.

Intriguing news, right? Or maybe you think, ‘Why should I care? Why does it matter if Lyft goes public?

Regardless, there’s certainly a lot to unpack here.

And while the company won’t go public until the end of March, it’s definitely worth talking about now. The Lyft IPO could present some interesting trade opportunities.

Traders, prepare to do some research. But first, here are a few things to know about what this news can mean for you.

Download the key points of this post as a PDF

Lyft Going Public: The Details

So, yeah, Lyft is going public.

Maybe you’re wondering why. Are they failing and desperate to raise money? What will the IPO look like?

There are a few things you should know about this big announcement.

IPO Information

First, you might want to know what plans Lyft has for its IPO.

Lyft intends on selling 30,770,000 million shares at a range of $70 to $72 per share. Remember, that’s just the initial offering price and can change.

By going public, Lyft’s hoping to get a valuation of roughly $20 billion — an increase of $5 billion from the company’s private valuation of $15 billion. This valuation makes Lyft what one might call a ‘decacorn’ (that’s finance-speak for a company worth at least $10 billion).

Why Is Lyft Going Public?

The reason here is simple and the same as any company: to raise money. With 30 million shares priced at $72, Lyft raised $2.2 billion.

For some traders, this can be a red flag. Companies that go public often do so as an act of desperation. They need money to stay afloat and they need it fast.

Day traders are probably familiar with this situation from dealing with penny stocks, which almost always go public out of desperation.

However, this isn’t necessarily the case with Lyft. While Lyft is rapidly burning through cash, the company would likely be able to sustain itself through venture capitalists and other private investments.

So … why else would Lyft go public?

Until now, Lyft always raised money privately. Venture capitalists put a lot of money into these startup companies with the expectation of making their money back and then some. That’s more than likely Lyft’s reason for going public: to raise money for its private investors.

What to Expect

What can traders expect when Lyft makes its market debut?

Lyft’s stock will probably spike on day one. Then it’ll more than likely go into consolidation — leaving very few trade opportunities. After a few more days, things could even out into a solid, predictable trend.

Similar Cases

Wanna gain some perspective? Let’s peeks at similar situations with GoPro, Snapchat, and Yeti.

GoPro

gopro stock price since IPO

GoPro stock price since IPO (Source: StocksToTrade)

GoPro is a specialized business. The company makes one thing. As a result, a lot of traders didn’t expect much from GoPro’s IPO.

Despite expectations, GoPro’s stock started at around $30 in 2014. It then soared to about $100 after a few months. Since then, it’s steadily decreased to its current price of approximately $6.  

And that didn’t happen overnight. It took years for those price changes to occur.

Whatever you think of the company, GoPro’s events prove that, no matter how skeptical you are of the long-term business model, there can still be myriad trade opportunities.

Snapchat

snapchat stock price performance since going public

Snapchat stock price since IPO Filing (Source: StocksToTrade)

Let’s flip over to the other end of the spectrum to Snapchat. This company has infamously outrageous cash-flow problems.

Lyft stands to gain 10 years of cash flow if the company can raise the hoped-for $2 billion on the first day of going public. Compare that to the meager two years of cash flow raised by Snapchat after going public.

Of course, Lyft can’t afford to remain stagnant. They’ll have to continue to adapt and grow. But a juicy influx of cash could allow them to do that.

For this reason, Lyft is more likely to be the next GoPro than the next Snapchat.

Yeti

YETI stock price since public

YETI stock price since IPO (source: StocksToTrade)

The last company we can easily compare Lyft to is Yeti. You probably hear plenty about this stock on StocksToTrade. Yeti makes frequent appearances on the STT Pro watchlist.

Yeti debuted at around $14 and was as high as about $30 as of a few days ago.

Lyft’s short-term chart has the potential to be similar to Yeti’s … It’ll likely be very volatile initially, then stabilize, then steadily increase.

Like Yeti, Lyft has plenty of brand recognition, and some traders are all about that.

What About Uber?

It’s hard to talk about Lyft without mentioning Uber. Both of them, of course, are the largest rideshare startups. Just about everyone has used one or the other, if not both.

Uber, though, seems to have much more brand recognition. It’s popular to the point that people often ride in a Lyft and call it an Uber. Sort of like how a lot of people call lip balm ‘Chapstick’ or a tissue ‘Kleenex.’

An Uber IPO could be very beneficial for Lyft.

If Lyft’s stock manages to stabilize, and Uber goes public after about a month or two, it’s very possible that a successful Uber IPO could boost Lyft’s stock as well.

Immediate Trading Ideas

Lyft probably won’t go public for about another week — if not longer.

Here’s the thing: Lyft’s stock might very likely be extremely choppy initially. That means it could be super risky to trade.

But that doesn’t mean you’re left high and dry. In the meantime, here are a few trade potentials for your consideration.

DCAR & HYRE

DropCar (DCAR) and HyreCar (HYRE) are both low-priced momentum stocks that many traders are targeting.

DropCar offers two services identified by fictional characters. ‘Steve’ will pick up your car, park it at a nearby parking structure, then fetch it when you need it. ‘Will’ will wait with your car while you do something like go shopping or go to a concert.

DCAR stock price 6 month performance

DCAR stock price over last 6 months (source: StocksToTrade)

HyreCar allows drivers to rent cars to then drive for rideshares like Uber or Lyft. Or, car owners can rent out their car to Uber and Lyft drivers.

HYRE, in particular, stands to benefit from the increased interest in Lyft. While DCAR offers a service that’s somewhat relevant to ridesharing, HYRE is directly linked with rideshare services. While these companies aren’t necessarily rideshare companies, you can see how the announcement of the Lyft IPO might increase interest in similar services.

HYRE stock price chart

HYRE stock price over the last 6 months (Source: StocksToTrade)

Keep in mind, though, that these are very risky stocks. As always, you need to do your due diligence before trading.

Make a plan, set your goals, cut losses quickly, and remain disciplined. While this Lyft news might increase interest in these stocks, nothing’s a sure thing.

Watch how these stocks behave as Lyft’s IPO approaches and stick to your trading strategy. Don’t get caught up in the hype. Stay rational and disciplined. And always stick to your plan.

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Final Thoughts

Lyft going public is huge news and presents some intriguing trade opportunities.

What should you watch for?

Lyft could see a similar trajectory to GoPro and Yeti. After a rocky start, it might continue to increase.

And Lyft isn’t the only company that stands to benefit. This announcement has the potential to influence stocks in related industries. Do your research. Watch for those momentum gainers.

We’ve said it a zillion times: nothing’s a sure thing. It’s crucial that you perform thorough analysis, develop an effective strategy, and remain disciplined when making any trades.

What do you think about Lyft’s decision to go public? What are your plans to trade this IPO? Please share in the comments below!

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