Lyft Stock Soars & There's More Ahead

It feels like I’ve been on an island with Lyft $LYFT ( ▼ 2.43% ) stock since the spotlight article came out in December 2024.

I thought the 10x thesis behind Lyft stock was pretty straightforward.

• 10x market growth opportunity in autonomy.

• Lyft’s stock was valued at ¼ the price of Uber, so multiple expansion was possible.

• Lyft could more easily “burn the boats” than Uber and go all-in on autonomy.

• The Flexdrive subsidiary enabled fleet partners to use Lyft for maintenance and operations.

Since then, we’ve seen more steps forward with autonomy, which I don’t think anyone can deny is “real” at this point.

And Lyft just joined the big leagues.

The company announced a partnership with Alphabet’s $GOOG ( ▼ 0.21% )  $GOOGL ( ▼ 0.35% ) Waymo to both operate Waymo vehicles and bring them to the Lyft network. I think this is the first of many such deals that will drive revenue growth, margin expansion, and higher multiples for Lyft stock, which finally has some momentum.

The Waymo Deal

Waymo is interesting today because it has more optionality than any other company in autonomy. It’s proven safe operations for autonomous vehicles, the Waymo app has been successful in attracting customers, and Alphabet has the balance sheet to go it alone if it wants to.

But Waymo struck deals with Uber $UBER ( ▼ 1.6% ) in Atlanta, Austin, and Phoenix, adding Moove to operate the fleet in some instances. In Dallas, Waymo is working with Avis to operate the fleet, and the Waymo app will be the demand source.

These are tests, and the agreement with Lyft is no different. Lyft will handle operating the fleet, but the demand will be a hybrid of the Waymo app and Lyft app, with Waymo likely giving preference to itself.

Notice that this is Lyft building an AV facility, not just leveraging existing infrastructure. Flexdrive is a foot in the door, but Lyft will likely have to earn its keep on the demand side because Waymo is keeping open the possibility of operating its own app long-term.

Lyft Becomes a “Modular Aggregator”

What’s unique about Lyft’s place in the autonomy market is how modular the company looks.

Waymo came with a supply of vehicles, but they chose to use Flexdrive for operations and maintenance and only partially use Lyft for demand.

This could be an advantage for Lyft in the future as more autonomous supply comes to the market.

Autonomous vehicle suppliers could “pick and choose” what makes sense for their operations. Some may choose financing (through Marubini), some may choose Flexdrive’s fleet management and operations, and some may choose to use Lyft for ride demand.

The model is flexible.

And over time, Lyft could build a modular services business around its ride demand aggregation business.

Could other services like drone deliveries, food delivery, robotics, and other services be added as modules to the business? There’s optionality if Lyft leans into being a “modular aggregator”.

Lyft’s Financial Position

What I have to question is how expensive the Flexdrive/AV rollout may be. Lyft recently closed a $500 million convertible debt offering, but that came only months after announcing a $750 million share buyback program, including $200 million accelerated buyback.

There’s even a $95.7 million acquisition of 5.7 million shares as part of the debt offering, which is odd given that this is debt convertible into stock with an expensive covered call attached and plenty of cash on the balance sheet.

Which is it?

Does Lyft need money to fund expansion, or does it have so much money that the company can buy back stock?

I honestly don’t know the answer right now.

Lyft should have plenty of cash to fund operations and a buyback.

Were AV expansion plans more expensive than Lyft thought?

Is Lyft setting up for an acquisition?

Is there something I’m not thinking of?

Time will tell, but as much as I like Lyft’s moves in autonomous vehicles, bringing May Mobility and Waymo on board with VW/Mobileye waiting in the wings, I’m puzzled by the debt offering.

How High Could Lyft Stock Go?

4 factors drive stocks higher:

1. Revenue growth

2. Margin expansion

3. Multiple expansion

4. Buybacks

Lyft could have all four working in its favor, and that’s why this is one of my favorite asymmetric stocks.

Starting with revenue growth, analysts are only expecting 12.7% revenue growth this year, 13.4% next year, and 12.4% in 2027. If autonomy can help Lyft expand supply in markets like Nashville, we could see significantly higher revenue growth.

There’s also an opportunity to take autonomy to new markets. Canada is still nascent, but the acquisition of Freenow also gives Lyft a footing in Europe. This would naturally fit with autonomous vehicle fleets as they launch over the next few years.

I will also point out that revenue recognition may be impacted by autonomy. Today, Lyft only records the portion of each ride that it keeps as revenue, so the driver’s portion is not accounted for as revenue. With an autonomous vehicle, Lyft may account for the full ride fare as revenue with COGS, including the revenue shared with partners. This may accelerate revenue growth while impacting margins.

On the margin side, I think autonomous vehicles could help Lyft’s operating margins, even if they come with lower gross margins. That’s because Lyft will have less cost associated with recruiting, training, and maintaining a human driver fleet.

Multiple expansion is the most obvious opportunity for Lyft. Simply matching Uber’s price to sales multiple would be a 3x in the stock, and DoorDash trades for 6x more.

Depending on the pace and price of buybacks, Lyft could also reduce shares outstanding over the next few years. Although I’ll note that stock-based compensation is a problem for the company.

Combine the opportunity for revenue growth, operating margin expansion, and multiple expansion, and I think the 10x story is well intact for Lyft.

Now that it’s playing with the big names in autonomy, I think it’s more likely we'll see more deals.

Maybe Zoox?

Maybe Volkswagen’s vehicles will be coming in 2026?

Maybe more May Mobility vehicles?

Whatever is next, it looks like the tailwinds are firmly behind Lyft.

Disclaimer: Asymmetric Investing provides analysis and research but DOES NOT provide individual financial advice. Travis Hoium may have a position in some of the stocks mentioned. All content is for informational purposes only. Asymmetric Investing is not a registered investment, legal, or tax advisor, or a broker/dealer. Trading any asset involves risk and could result in significant capital losses. Please, do your own research before acquiring stocks.