Uber is seen as a 'once in a generation company,' but it still faces major competition from Lyft

Dara Khosrowshahi UberMichael Cohen/Getty Images for The New York Times

  • Uber's imminent initial public offering is expected to present a massive opportunity for investors, but competitor Lyft's threat is not to be ignored, a Wall Street analyst said on Wednesday.
  • "Although Uber is the number one player, Lyft has grown rapidly over the last few years and has eaten at Uber's market share," Susquehanna's Shyam Patil said.
  • Uber's slowing bookings and revenue growth are additional risks investors will have to consider, Patil said.
  • Visit Markets Insider's homepage for more stories.

Uber is set to begin trading this month as the second ride-hailing company to hit the public market, and a Wall Street analyst has a clear message ahead of its debut: Uber has a major opportunity, but rival Lyft's threat cannot be discounted.

"We agree that UBER is a once in a generation company with a massive opportunity to revolutionize transportation and logistics," Susquehanna analyst Shyam Patil, who hasn't yet rated the still-private company or given it a price target, wrote in a note to clients on Wednesday.

"Slowing growth, however, creates uncertainty around future trajectory. Given the large growth opportunity for UBER, it's concerning to see growth decelerate meaningfully over the past several quarters."

Bookings growth has slowed from an annual increase in the high-50% range in the first quarter of 2018 to the mid-30% range during this year's first quarter, he noted. Adjusted-annual-revenue growth has slowed even more dramatically, from 85% to 14% over the same period.

Still, with Uber seeking a valuation as high as $90 billion in the public market, it's expected to be among the largest initial public offerings of all time, according to a Bloomberg analysis. Lyft, by comparison, went public at a $24 billion valuation.

By the same token, Patil said Uber's smaller competitor poses another fundamental risk.

"Uber and Lyft have nearly identical products and are the two dominant players in the space, so competition is extremely intense," he said. "Although Uber is the number one player, Lyft has grown rapidly over the last few years and has eaten at Uber's market share."

To be sure, it already appears investors' appetite for Uber is robust. Its IPO roadshow, which kicked off on Monday, is seeing huge demand, according to a Bloomberg report, citing people familiar with the matter.

Read more: Uber has kicked off its IPO road show. Here's where the ride-hailing giant's executives and bankers are heading to court investors.

Of course, Lyft's IPO was also oversubscribed, and shares have plunged since debuting in late March. An oversubscription indicates investor demand exceeds a company's available shares.

Meanwhile, Patil's "neutral" investment rating on Lyft shares comes mostly from his concern over Uber's threat as a larger competitor.

Now read more markets coverage from Markets Insider and Business Insider:

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