LUPA stocks have gotten a lot of attention recently and gone public with high-profile IPOs, but are they worthwhile investment opportunities?
LUPA is a nickname given to four high-profile technology companies that have gone public in recent years — Lyft (NASDAQ: LYFT), Uber (NYSE: UBER), Pinterest (NYSE: PINS), and Airbnb (NASDAQ: ABNB). While these companies have some commonalities, investors should consider them individually.
Lyft is a ride-sharing app that went public in March 2019. While it has failed to bypass its IPO price, the stock has more than doubled over the past year. Lyft has the smallest market cap of the LUPA stocks at about $20 billion.
Uber has long been the king of the U.S. ride-hailing space. In February 2021, Uber’s share of the market was about 68% compared to a 32% share for Lyft. The COVID-19 pandemic wasn’t a good time for these companies as people largely stayed home. Both companies are also facing threats of new legislation in various regions that could see significant increases in driver costs.
Lyft spends a lot to attract drivers and new customers. Post-pandemic, it is reportedly offering bonuses of $800 to drivers. The company has also not been profitable, which eventually will start to wear thin with investors. While it has solid market share and demand is starting to increase again, the lack of profitability and potentially harmful new legislation coming into effect, Lyft does not appear to be a good investment at the moment.
Uber is the big name in the ride-sharing space. It generated a huge amount of hype before going public in May 2019. While its stock did not perform very well for a while, its price has doubled since October 2020 as demand returns. Uber faces a lot of the same challenges as Lyft, including increased driver costs and lack of profitability.
Uber’s rapid global expansion in recent years is an attempt to grab as much global market share as possible, which has required big investment. Its Uber Eats segment has been performing strongly during the pandemic, with the food delivery service’s revenue rising 152% in 2020 to $4.8 billion. It now has a 29% share of the global food delivery market.
While huge demand for Uber’s services is expected as the global vaccine rollout continues, its share price is sitting at an all-time high with no clear road map to profitability. With a business model that can be easily replicated, it is hard to know what the future holds for Uber.
Pinterest (NYSE: PINS) has built a sturdy business over the years. The April 2019 IPO went off without much fanfare and its share price has performed strongly over the past year.
The lifestyle information-based platform relies heavily on advertising revenue, which meant some struggles during the initial months of the pandemic. However, as advertising spending increased as the year went on, Pinterest’s revenue began to pick up again. Its monthly active user growth rate increased from 26% in 2019 to 37% year-on-year (YoY) in 2020. This was helped by people staying home during the pandemic, bringing the platform’s monthly active users up to the 459 million mark.
The platform has been investing in the rollout of new features that aim to boost the return for advertisers and add value to users. Pinterest has also seen success in non-U.S. growth over the past year. Having managed to become profitable and develop a strong balance sheet, Pinterest looks to have a bright future.
Airbnb (NASDAQ: ABNB) is the main online marketplace for organizing short-term rentals and homestays. It has disrupted the traditional hotel industry massively, allowing the everyday person to easily rent out a room or entire property.
Airbnb was the last LUPA company to go public, doing so in December 2020. With an initial IPO price of $68 per share, it opened at $146 and almost reached $220 per share in subsequent months before recently dropping back.
While it has carved out an impressive market share across the world to date, it still reported a net loss last year of $4.6 billion, citing the global pandemic shutdown as the cause.
Airbnb will quickly recover as travel is expected to skyrocket once pandemic restrictions begin lifting. It also has been spending significantly on R&D and growth. Airbnb could be profitable if it cut back in these areas, but its main focus is expanding its global host network. While it could be a rocky road for investors over the next couple of years, a long-term view looks positive.
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