Lyft and Uber will do just fine… But Tesla will be the winner of the rideshare revolution… In the mailbag: “Doug is admirable for having a backbone”…
Yesterday, we showed you how folks who bought shares of rideshare company Lyft (LYFT) right after its initial public offering (“IPO”) last week are getting beat up.
The stock is down 21% from its post-IPO peak on Friday. And the media is having a field day over Lyft’s share price belly flop.
But our tech analyst here at Legacy Research, Jeff Brown, sees things differently. Here he is with more on what makes Lyft so attractive as a business…
Lyft is actually a fantastic business. It’s valued at $23 billion. It has zero debt. It’s growing at 60% a year. And it doesn’t own or maintain a single car.
Compare that with car rental giant Hertz. It’s worth $16.7 billion. But it carries $16.3 billion in debt. And it’s expected to grow 3.7% this year. I know which business I’d want to own.
Jeff says the press is also wrong on the IPO being a flop…
There’s nothing but negative headlines in the media right now. But the Lyft IPO was an incredible success. It went to the investment banks expecting to get $62 to $68 per share for its business. In the end, there was so much demand that the IPO was priced at $72 a share.
This allowed Lyft to raise $2.3 billion. The company already controls about 30% of the U.S. rideshare market. The IPO gave it enough cash to live off for the next couple of years so that it can further grow its business.
If it’s between Jeff’s take and the consensus view, we know who we’ll be backing.
Jeff has a proven track record of getting these calls right. For instance, at our Near Future Report tech investing advisory, he’s racked up a 71% win rate in the model portfolio.
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When it comes to the ridesharing market, the mainstream news sees no further than Lyft and its larger rival Uber.
These are the two dominant players right now. But neither will take the ridesharing revolution to the next level.
That honor will fall to the company that everyone loves to hate – Tesla (TSLA). And in today’s dispatch, Jeff will show us exactly why.
But first, we need to take a look at the most important aspect of the ridesharing business model…
It’s not yet proven to make any money.
That works out as a loss of $30.26 for every ride. Uber also posted losses on every trip last year.
And the major cost to item on both their bottom lines is drivers’ pay. Lyft, for example, takes only 20% of each fare, leaving the other 80% to its drivers. And Uber takes only 25% of each fare.
Cutting out those drivers is the key to making these companies profitable. And that will happen when companies switch from cars driven by humans to self-driving fleets. Jeff again…
The moment one player removes the costs of a driver, it will force the rest of the industry to go autonomous. Otherwise, no one could compete.
Google’s self-driving project, Waymo, exists to license its technology to rideshare companies. And the level of venture capital funding in autonomous driving technology is still high. So there will be an ecosystem of new companies to supply self-driving technology.
We’re going to have lots of self-driving rideshare options as consumers over the next few years.
And as we’ve been showing you, one of those options is going to be a self-driving Tesla.
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As Jeff has been telling Near Future Report readers, it’s also one of the world’s most advanced artificial intelligence (AI) companies.
And its self-driving technology is the best there is.
Each Tesla that rolls off the production line is built around a powerful AI platform that allows it to drive itself. And the company has already racked up more than 1.5 billion miles of autonomous driving.
This is needed to train the AI driver. Tesla’s nearest rival in the self-driving tech, Waymo, has done only 1% of those miles.
This will allow it to roll out fully-autonomous driving – meaning the car can handle the majority of driving situations independently – by the end of 2020.
When it goes fully autonomous next year, Tesla will be able to “turn on,” near instantly via an over-the-air software update, a fleet of self-driving cars.
As Jeff explains it…
Tesla owners will be able to opt-in to the network and have their cars serve as taxis, working for them when not in use. Imagine what kind of demand would be created when your Tesla can earn more per month than your automotive loan payment. It pays for itself and then some.
In the world of networked fleets of self-driving cars, you’ll drive to the office in your Tesla. (Or, if you have emails to catch up on during your commute, its onboard AI drives you.)
You’ll take out your smartphone, and you’ll tap a button on an app that instructs your Tesla to “join the fleet.” While you’re at work, your Tesla will drive itself around giving rides and earning you money.
Then, after it works on your behalf all day as part of a rideshare fleet, it will drive itself back to your office in time to pick you up for your commute home.
Wall Street values Tesla as just another car company. But it’s a lot more than that.
It’s also in pole position to roll out the first self-driving rideshare service.
Uber has about 750,000 drivers in the U.S. By the end of the year, Jeff says Tesla will have more of its cars connected to its U.S. network than Uber has drivers.
This will allow Tesla to launch a nationwide network of self-driving cars with a software update. When it does, he believes it will create a business worth tens of billions of dollars essentially overnight.
Jeff expects shares to soar between 50% and 100% over the next three years.
And right now, you have a good window of opportunity to buy in. At $292 a share at writing, Tesla is under Jeff’s buy-up-to price of $300 a share.
Today, the conversation turns back to Legacy Research cofounder Doug Casey and his “totally incorrect” predictions for 2019 and beyond – including what he says could be the biggest crisis to hit America…
“Did Doug cross the line?” Hell no. Doug is admirable for having a backbone. Nowadays, it is almost heroic with the degree of cowardice everywhere. I hope one day to be as outspoken and true to my own perspective as Doug (also as wealthy).
– Brendan V.
I watched Doug’s report all the way through. The only thing I could take umbrage with was Doug’s calling Trump an opportunist as if it was something bad, when he wrote the book on opportunism.
– Ernest C.A.
I started preparing years ago, well before I ever heard of Doug Casey. We all will suffer when the “big one” hits, but those with debt and nothing set aside stand to lose everything.
I wouldn’t want to be living in a big city like the majority do! Of course, I’ve never lived in a big city and I hope I never do! I actually grew up on the family farm and I still grow a garden.
– Don K.
If you missed Doug’s limited-time discussion last Wednesday, you can read up on four of his predictions in the March 29 issue of our Palm Beach Daily e-letter.
Meanwhile, thoughts on the capitalism vs. socialism debate, after reader Bruce A. gave a list of reasons why he believes there’s merit in a mixed system…
Every one of the “welfare” policies Bruce doesn’t like is a way for the government to support those businesses that provide the real economy its juice. The tax law is set up to benefit business this way, so they can keep employing and investing to get bigger, which means more jobs. That is the real way to protect the middle class.
It is just a shame that left-leaning professors fill students with so much misinformation and make it very difficult for most to understand how and why the U.S. became so powerful in the first place. The economy of today is already hampered by too many regulations, too many laws that protect inefficient or outdated businesses (think taxis vs. Uber), and “well-meaning” programs that are actually dis-incentives to produce.
What most socialists don’t understand is how the dole robs individuals of their self-worth, which is one of the requisite attitudes for human happiness.
– Rory O.
Do you agree with Rory O. that professors are making it difficult for young Americans to understand what made the U.S. powerful? As always, write us at feedback@legacyresearch.com.
Regards,
Chris Lowe
April 3, 2019
Lisbon, Portugal