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So Lyft has 40% of the US ride-hail business and is valued at (checks watch) $23 billion. Would you pay $60 billion for the entire US ride-hailing business?
/x
/x
(even taking a Panglossian view on margins, disruption from autonomous, and odds of your capital getting transfigured into a conflagration of micro-mobility devices.)
Ride-hailing US worth $60 billion?
Short answer: no.
And it isn’t that complicated.
/1
Ride-hailing US worth $60 billion?
Short answer: no.
And it isn’t that complicated.
/1
The US ride-hailing business as a whole has grown to $21 billion in gross revenue with growth slowing from 70+% to <40% YoY.
A simple diffusion curve would suggest growth will continue to decay and would optistically suggest 2023 sales of $48 billion.
Seems a lot.
/2
A simple diffusion curve would suggest growth will continue to decay and would optistically suggest 2023 sales of $48 billion.
Seems a lot.
/2
But $48 billion is consistent with city-specific ride-hailing data suggesting elasticity to convenience increases addressable markets of 2x - 4x.
Prior to Uber the US car-for-hire market was $14 billion annual.
(See here onlinepubs.trb.org/onlinepubs/sr/…)
/3
Prior to Uber the US car-for-hire market was $14 billion annual.
(See here onlinepubs.trb.org/onlinepubs/sr/…)
/3
Let’s call $50 billion the total US ride-hail opportunity in 2023, consistent with market expansion above traditional taxi
(but inconsistent with any price increases due to regulatory imposition or labor unrest, both of which are... erm... somewhat likely)
/4
(but inconsistent with any price increases due to regulatory imposition or labor unrest, both of which are... erm... somewhat likely)
/4
What do you get for $50 billion in ride-hailing gross revenues?
A hefty 30% platform fee (of which a mere half goes to AWS, insurers, fintech payment partners &c), so you the business owner clear 15% in gross profit:
7 billion smackers.
It’s a license to print money!
/5
A hefty 30% platform fee (of which a mere half goes to AWS, insurers, fintech payment partners &c), so you the business owner clear 15% in gross profit:
7 billion smackers.
It’s a license to print money!
/5
A 50% gross margin is consistent with a 25% ebitda margin at maturity (at which point I remind you that I am taking the optimistic view); you as the owner of this monolithic all-of-US ride-hailing franchise have whittled yourself $3.5 billion in 2023 operating earnings.
/6
/6
What do you pay for a capital-light business at maturity with $3.5b in ebitda? Meh 15x EV/ebitda.
All of US ride-hailing in 2023–the whole enchilada—(barring regulatory, autonomous, or labor disruption, and assuming competitive intensity wanes) could be worth:
$50 billion
/7
All of US ride-hailing in 2023–the whole enchilada—(barring regulatory, autonomous, or labor disruption, and assuming competitive intensity wanes) could be worth:
$50 billion
/7
Buy 40% of that business today for $23 billion,
don’t get tripped up by autonomous,
skate by all the regulatory uncertainty,
avoid the potholes on your micro mobility device,
and you might, maybe, possibly, could just preserve your capital as measured over 5 years.
😐
/fin
don’t get tripped up by autonomous,
skate by all the regulatory uncertainty,
avoid the potholes on your micro mobility device,
and you might, maybe, possibly, could just preserve your capital as measured over 5 years.
😐
/fin
