Lyft It Up
Lyft went public yesterday at $87.24 share, valuing the company at $25 billion. A company that lost $900 million last year and that was on a doubling of revenues from the year before. LYFT owns no cars and none of its drivers are employees. They make their money skimming of the top of fares earned by an army of 1.4 million, "independent contractors." What did the market think was worth $25 billion? The business model.
This is not the first time the market went crazy over companies with nothing more than a concept. In fact, some of them didn't even have that. All they had was a name with a dot.com after it, in other words: The business model
Notable dot.com IPO's
eToys.com was valued in 1999 at $8 billion, its stock soaring from $20 its $70 its first day. In February 2000 those shares were trading at $1 when the company filed for bankruptcy.
Webvan.com raised $375 million in 1999 before its shares fall from $30 to six cents in less than a year.
Pets.com raised my $90 million in February 2000, and folded none months later.
In November 2009 of the 280 stocks in the Bloomberg Internet index index, 79 were down 90 percent or more from their 52-week high. Another 72 were down 80-89 percent. Only five are down less than 5 percent. The total loss was $1.7 trillion.
So what does LYFT have to do with the dot.com bubble? I've been comparing current market conditions (pattern recognition) with the dot.com crash of 2000-2001 for the past six months. With the advent of the LYFT IPO and UBER not far behind, and who knows what is on the shelf waiting now, the similarities are striking.
Nothing the market has done this past week or two, or even YTD, has swayed me from the long term top scenario. In fact I maintain that it has already started, with these all time highs:
New York Composite Index: March 12, 2018
Russell 2000: August 27 2018
S&P 500: October 1, 2018
Nasdaq 100: October 1, 2018
The first leg down was into Christmas Eve, 2018. From there the market has been in a time consuming counter-trend rally. When it ends, the market will take out those Christmas Eve lows. The Dow is 1,000 points below its October high, if I am right, it has run out of all but those 1,000 points. The target on the downside is likely to be the Aug 2016 low (start of the latest leg up) at 15,370. That is just shy of 50%, which coincidentally or not was exactly what the S&P 500 fell during the 2000 Nasdaq crash.
There is no guarantee that this scenario will play out, I wanted to make the point that no matter how strong the market may look from those late December lows, it still hasn't be strong enough to take out its 2018 highs. The bear market scenario, and all the opportunity that comes with it, is still in play.
New trades from Friday:
Buy Signal: NFLX on a move above $362 (Currently $358)
If triggered: May $360 Call ( Currently about $20)
Note: $20 is $2,000 per one call, same as 5 calls @ $4.00 each)
Sell Signal: Macy's (M) on drop below $23.50 (Currently $24)
If triggered: May $24 Put (Currently about $1.50)