🚘 Lyft: Lifting Out Of Losses?

Google's monster quarter makes the stock soar 5% in after-hour trading


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🚘 Lyft: Lifting Out Of Losses?

Ridesharing company Lyft (LYFT) is selling its autonomous vehicle division to Toyota for $550M. The deal is seen as a win-win, reducing the risk exposure for Lyft, while giving Toyota’s automation ambitions a much-needed fillip. (Tweet This)

Background
In February this year, Toyota (TM) and its subsidiary Woven Planet Holdings held a groundbreaking ceremony for a 175-acre smart city prototype at the base of Mount Fuji. Woven City, as it was called, would be home to researchers working on different technologies such as autonomy, robotics, personal mobility, smart homes, etc.

Until now, Toyota offered Level 2 automation in its cars – the vehicle can control both steering, acceleration, and deceleration but a human still sits in the driver’s seat and can take control of the car at any time. In the meantime, San Francisco-based Lyft has had 300 employees working furiously on Level 5 automation – the vehicle is fully in charge with zero human intervention.

With the pandemic pretty much locking people indoors last year, rideshare companies such as Lyft and Uber have had a tough time navigating the situation. Cash-burning businesses had to be addressed so that the core could be revived. That’s what Uber did, largely ceding control of its self-driving unit to auto tech company Aurora. So could Lyft be far behind?

What happened?
Woven Planet Holdings is paying $550M in cash to Lyft for this acquisition. $200M will be paid upfront and the remaining $350M payable over the next five years. The agreement allows Woven Planet to have access to precious real-world driving data that Lyft continues to collect for the 10K+ vehicles it currently rents out to consumers and ride-hail drivers.

This acquisition is a shot in the arm for Toyota. As it builds out Woven City, this deal automatically gives Toyota a presence in Silicon Valley and London as it gears up for the prime time in mobility in major urban centers. Given its stake in Chinese ride-hailing firm Didi Chuxing and Southeast Asia’s Grab, this won’t be the last such acquisition either.

As for Lyft, the sale will reduce its annual operating costs by $100M. As the post-pandemic recovery continues, there’s a possibility that this will in fact allow Lyft to have an operating profit in Q3. That compares to a loss of $458M over revenues of $570M in Q4.

The fact that Lyft’s relationship with Woven City is structured as a multi-year non-exclusive agreement means the company can continue to offer services such as routing, consumer interface, and management, etc. for additional revenue for partners’ autonomous vehicle fleets. Now, that’s some much-needed human ingenuity and intervention!

Market reaction
LYFT closed the day at $62.14, down 1.46%; in pre-market trading, the stock is down 0.16%.

Company Snapshot 📈

LYFT $62.14 -0.92 (-1.46%)

Analyst Ratings (39 Analysts) BUY 62%  HOLD 33%  SELL 5%


Newsworthy 📰

Giant: Alphabet sets profit record, plans $50 billion buyback (GOOG -0.84%, pre-market +5.09%)

Pinned: Pinterest’s user growth slows as pandemic curbs ease (PINS +1.11%)

Comeback: Visa emerging from pandemic ‘storm’ as spending volumes recover (V -0.19%)


Later Today 🕒

  • After Market Close: Apple Inc Earnings (AAPL)
  • Crispr Therapeutics AG Earnings (CRSP)
  • Before Market Open: Automatic Data Processing Inc Earnings (ADP)
  • Before Market Open: Yum! Brands Inc Earnings (YUM)
  • Before Market Open: Boeing Co Earnings (BA)
  • Ford Motor Co Earnings (F)

Fun Fact of The Day 🌞

Turkeys can blush


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