Lyft (LYFT -0.79%) has been a publicly traded stock since March 2019. The company sold 32.5 million shares at $72, raising about $2.3 billion from its initial public offering (IPO).
Initially, the ride-hailing business planned on selling about 30.8 million shares at a price range between $62 and $68. But the share price quickly went south after they began trading. If you decided to invest in Lyft three years ago, how much money would you have now?
Shareholders lost money
Three years ago, you could’ve bought the company’s shares at about $48, or 33% less than the IPO price. However, that didn’t turn out to be a bargain price. Currently, the stock trades at around $12, which translates into an astounding 75% loss. If you’d invested $1,000 at the IPO, you’d have less than $250 now.
The S&P 500 returned nearly 31% during this time. That same $1,000 would’ve grown to over $1,300 if you would have invested passively in the index.
Lyft’s revenue growth remains strong, growing 40.6% in the second quarter to $1.4 billion. Certain key metrics continue growing, including a 17% increase in gross booking to over $4 billion. And it achieved profitability under U.S. generally accepted accounting principles (GAAP), albeit just $5 million.
Amid this positive news, management issued lukewarm third-quarter guidance. It expects booking to come in at $4 billion to $4.1 billion, essentially flat from the second quarter, which may reflect its lower-fare prices as Lyft faces intense competition from Uber Technologies in the ridesharing industry.
Lyft is engaged in a battle for market share with Uber, but the latter has a bigger global presence and broader services. As a result, I’d hold off before buying Lyft shares until the company proves it can achieve sustained profitability growth. After all, stock pickers who thought they were getting a bargain three years ago were sorely mistaken.
