What Is Lyft’s Long-Term Revenue Growth Potential?

by Trefis Team
General Motors
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Ride sharing company Lyft has witnessed exponential growth in its revenues in the past few years. Between 2016 and 2017, the company’s net revenues grew by nearly 45%, and reports suggest that for the first half of 2018 the company has doubled its revenue to $909 million. Total revenues in 2017 were around $1 billion.

Our interactive dashboard on Estimating Lyft’s Long Term Revenue Potential  looks at the ride hailing market growth and estimates how much revenue Lyft can generate by 2030. You can use the outputs of this dashboard to arrive at your assumptions for our dashboard on Estimating Lyft’s Valuation.

According to a 2017 report by Goldman Sachs, the ride hailing industry is likely to reach a market size of $285 billion by 2030.

Goldman’s analysis estimates 15 million rides per day globally, which is likely to increase to 97 million by 2030. We take 15 million as a proxy for our estimated 2018 number of rides globally, and assume that the average gross revenue per ride will be around $9 in 2018 – based on Uber’s average given that Uber dominates the ride hailing market and has a global presence. Based on these assumptions, we estimate the ride sharing market size to be around $50 billion in 2018 – which is likely to increase nearly sixfold and reach around $285 billion by 2030.

Both Uber and Lyft are working on several initiatives encouraging users to ditch their personal vehicles in favor of hailing or sharing a ride. A focus on technology to provide efficient end-to-end mobility solutions are likely to boost the expansion of this market, as they could improve pricing and quality of service. Penetration of ride sharing users is growing steadily, leading to an increase in the market size.

Lyft currently operates around 10 million rides per week, which gives it a global market share of around 10% based on total number of rides (105 million per week, based on Goldman’s estimate of 15 million rides per day). However, since Lyft operates only in the U.S. and Canada, its revenue per ride is likely to be higher than the average – as revenue per ride is likely lower in emerging economies. Based on this, we assume that Lyft’s global market share could be around 15% of gross revenues.

Lyft’s share of revenue in each ride operated via its platform is around 20%. We expect this number to remain steady over the next decade, and based on these assumptions, Lyft’s net revenues could be around $8.5 billion by 2030. You can modify these assumptions in our interactive dashboard here to arrive at your estimate of Lyft’s long term revenue potential.

You can use this information to modify your assumptions for Lyft’s Price/Sales multiple to arrive at its valuation using our interactive dashboard Estimating Lyft’s Valuation. We expect Lyft to generate revenues of $1.5 billion in 2018, and this number is likely to increase by nearly 8 times in the next 12 years. Based on Lyft’s latest valuation of $15.1 billion, the company commands a Price/Sales multiple of around 10.5X. Lyft is not profitable yet, but the company is reducing its losses and with an increase in volumes and lower sales and marketing expenses, it could breakeven in the next 2-3 years.

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