Dear Mr. Berko: You certainly called Lyft correctly. Because it’s way down, is it a buy? Do you think Uber will profit by Lyft’s experience? If so, I might buy Uber to recover my losses on Lyft. -- N.C., Oklahoma City
Dear N.C.: As Mr. Gump said: “Stupid is as stupid does!”
LYFT came public at $72. And berserk mobs of screaming meatheads, meth-heads and dunderheads feverishly pushed LYFT to $88. Subsequently, LYFT imploded over 30 points. It’s still too high!
LYFT’s value isn’t supported by physical assets, revenue growth or earnings. It's supported by bunkum, baloney and mentally handicapped investors (called stupids). When LYFT’s 180-day lock-up period ends in October, enabling insiders to sell shares, the shorts will have a party. There’s nothing about LYFT that encourages me to recommend the stock.
Uber filed for an IPO shortly after Lyft, and will try to drive more cautiously. The filing will be similar to Lyft’s, yet won’t stop traffic or ring bells and will be priced about 25% lower than originally anticipated.
As I commented in a column weeks ago, there are three major reasons to own a stock: (1) improving revenues; (2) improving earnings; and (3) good or improving dividends. Uber has improving revenues, but that growth is being eroded by brutally competitive markets. Uber remains the ride-share leader in every country it operates in, but in the last year, its ride-share market position in nearly every market, especially in the U.S. and Canada, has been truncated. Unfortunately, few stupids consider that a negative.
Uber has burned through $13 billion in greenbacks since launching in 2009 and losing money every year. Uber lost $2.8 billion in 2016, $4.5 billion in 2017 and, thanks to last year’s sale of its Asian franchises, only lost $1.8 billion in 2018. Still that’s enough $2 bills to dam the Mississippi River at Natchez, Biloxi and Vicksburg. The losses will continue, and management has no bloody idea when Uber will earn a profit.
As most readers know, I consider dividends and dividend growth critically important to my investment thesis and seldom recommend non-dividend stocks. If an issue has exceptional growth and earnings potential and doesn’t pay a dividend, there are times when I’d recommend a position. But those times are few, and Uber doesn’t qualify. Some say if a miracle happens and Uber posts a profit, management may not be able to pay a dividend until 2031. But my two Malamut puppies, Abbot and Costello, won’t be around to enjoy the vigorish.
I doubt any new shareholders have a profit in LYFT. After the 180-day lock-up period ends, initial shareholders may sell millions of shares they’ve held for years. Prior to LYFT’s flop, Uber believed it could sell enough shares to value the company at $120 million to $125 billion! Now CEO Dara Khosrowshahi should be spending time in the Amen Corner of his church, praying the stupids will value Uber’s IPO at $100 billion. However, I can’t imagine how a company with slowing revenue growth, definite and continuing future losses, no earnings in site and no dividend for maybe 12 years could have a $100 billion valuation. A $100 billion valuation says Uber is worth more than Eli Lilly, which made $6.5 billion, or Nvidia, which earned $4.4 billion, or the immensely profitable Union Pacific and Norfolk Southern railroads.
The werewolves of Wall Street -- JPMorgan Chase, Credit Suisse and Jefferies -- that took Lyft public don’t give a hoot about the client. Knowledgeable as they are, they certainly knew LYFT would crash and investors would lose hundreds of millions. And the Street’s werewolves who’ll take Uber public know that UBER won’t maintain a $100 billion valuation, but they’ll recommend the stock anyway. There’s a difference between honesty and full disclosure. Honesty tells you the facts as stated are correct. Full disclosure tells you about ALL the facts!
(Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775, or email him at firstname.lastname@example.org.)