Ark Invest Says Autonomous Ride-Hailing Now Looks Even More Profitable Than Previously Estimated

As investors approach the one-year IPO anniversaries of ridehailing stocks Uber Technologies Inc UBER and Lyft Inc LYFT, there’s no question the investments have been disappointments up to this point.

Both stocks are trading below their IPO prices as losses continue to mount and the companies are still a long way from proving viable business models, but Ark Invest analyst Tasha Keeney said this week that ridehailing may ultimately end up much more profitable than Ark had previously modeled.

Keeney said the key to a profitable ridehailing business will be autonomy. She estimates the cost per mile of using the average U.S. taxi is $3.50, while the cost per mile of a personal car is 70 cents. However, Ark estimates the cost per mile of an autonomous taxi will ultimately be around 25 cents.

Other Winners

Not only will this make Uber and Lyft big winners, but Keeney said AV technology leaders like Tesla, Inc TSLA and Alphabet, Inc. GOOG GOOGL subsidiary Waymo will benefit as well.

“With these compelling economics driving customer adoption, ARK’s research previously concluded that companies owning and operating the autonomous technology stacks – like Waymo and Tesla – could command a take-rate of 20-30% of revenues, similar to that for Uber and Lyft, and that investors should be willing to pay $2 trillion today for the winning platforms,” Keeney said.

Ark Invest is one of the most bullish Tesla investors on Wall Street and recently raised its price target for the stock to $7,000.

Keeney estimates the winners in the ridehailing group could have take rates in the 60% region and generate a net present value of $12 trillion in cash flows. Today, Uber and Lyft’s take rates are around 20%.

“Not only do we expect the companies to benefit, but consumers will pay likely 30-70% less for point to point travel, a win-win caused by truly disruptive innovation,” Keeney wrote.

Benzinga’s Take

Much like Tesla, which has yet to turn a profit in a single calendar year, the bull case for Uber and Lyft relies on investors willing to be patient and ride out heavy losses in the hopes that the businesses will ultimately be profitable at scale. Tesla CEO Elon Musk has previously said the company would have one million autonomous robotaxis on the road in 2020.

Do you agree with this take? Email feedback@benzinga.com with your thoughts.

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