Lyft (LYFT) shares were gaining ground on Friday after short-seller Andrew Left’s Citron Research issued an upbeat note on the stock, saying ride-sharing is a “megatrend,” not a fad.
The company’s shares made their trading debut a week ago after pricing its initial public offering at $72. But by Monday, the stock had fell below that level amid mixed analysts’ opinions. It was back above the IPO price with a 4.1% rise at the time of writing Friday.
Citron said Lyft is “The Amateur Short” and that “shorting disruptive companies that dominate a megatrend simply because they lose money is a sure way to go broke.”
Lyft said in regulatory filings ahead of its listing that it posted a loss of more than $900 million last year on $2.1 billion in revenue. Still, it’s been gaining market share from its main competitor, Uber Technologies, reaching 39% of the domestic market at the end of 2018, up from 22% in December 2016.
“The principal of Citron has been an investor in Lyft for the past two years and we have increased our position in the open market,” the investment research firm said. “The entire ride share market in the US only accounts for 1% of miles traveled today… we have only just begun.”
The company’s active rider numbers have grown and Citron said the number will increase as the population ages, because the percentage of 18-year-olds using ride sharing is “exponentially higher” than the percentage of 70-year-olds.
“Lyft is in a rare class of businesses along with Amazon and Alibaba where people use the service more and more over time and don’t need to be reacquired,” Citron said. “This is in stark contrast to most other consumer businesses like Wayfair and/or Carvana where a customer’s purchases do not increase.”
Fewer American 16-year-olds are getting drivers’ licenses and millennials are turning away from car ownership to ride sharing, Citron said. They added that the future of ride sharing “is a subscription model that if executed properly is the ultimate blue sky.”