Investors in high growth sectors such as the up and coming ride-sharing sector have cheered the addition of companies like Uber Technologies, Inc. (NASDAQ:UBER) to public exchanges. Both Uber and Lyft, Inc. (NASDAQ:LYFT) have experienced a somewhat rocky start since their initial public offerings (IPOs) earlier this year, with concerns around debt levels and operating costs overshadowing an otherwise impressive growth story which has been fueled by losses, thus far.
In the case of Uber, management has announced a plan to cut costs down to manageable levels by stripping away some of the promotional and marketing expenses that has been one of the driving factors behind the company's meteoric rise, with the hopes that such maneuvers will help the company gain traction toward profitability in the medium term.
As with many businesses without track records of profitability for extended periods of time, I have generally steered clear of both of these plays, holding out for operating profit before considering jumping into the fray on this play, or on any sector which has not historically shown profits, for conservative, fundamental reasons.
If you believe that Uber and Lyft are close to turning the corner and become profitable soon, this may be the growth play for you - otherwise, I would stay on the sidelines and be patient for the time being. Many other great companies exist today which provide investors with greater stability and cash flow potential in the medium to long term, in my opinion.
Invest wisely, my friends.
