BIRD is a relatively new company in the rapidly growing electric scooter rental industry. The company went public in November 2021 through a SPAC merger with Switchback II Corporation at a valuation of $2.3 billion. Since going public, BIRD’s share price has declined significantly, falling over 75% from its initial offering price. This steep decline leads to the key question – is BIRD stock a good investment today or is the company overvalued?
To determine if BIRD is a good stock to buy now, we need to take a deep dive into the company’s financials, business model, growth prospects, valuation, and potential risks. Critical factors to examine include:
BIRD’s business model and industry outlook
– Business model economics and unit economics
– Competitive landscape and differentiation
– Industry growth projections and market opportunity
– Operational metrics like ridership, scooters deployed, and revenue per ride
Financial performance and projections
– Revenue growth, margins, profitability, and cash flow
– Balance sheet and financial position
– Management forecasts and analyst projections
Valuation relative to peers
– Valuation metrics like P/S, P/E, EV/Revenue
– Growth prospects relative to valuation
– Comparing valuation to competitors
Potential risks and challenges
– Execution risks in new markets
– Regulatory restrictions on scooter businesses
– Competition from new entrants and substitutes
– Path to profitability remains unclear
Analyzing these key factors will determine if BIRD’s significant stock decline has created an attractive risk/reward for investors at current levels.
BIRD’s Business Model and Industry Outlook
First, we need to understand BIRD’s business model and assess the company’s competitive positioning and growth prospects within the electric scooter industry. Some key highlights about BIRD’s business:
– BIRD pioneered the electric scooter rental model in 2017. Users can rent BIRD scooters through a mobile app on a per ride basis similar to bikes and e-bikes.
– The company generates revenue through ride fees and monthly subscriptions. BIRD takes a cut of each ride fee and subscription.
– BIRD operates in over 350 cities globally with a large presence in the US and Europe. The company has deployed over 1 million scooters.
– BIRD faces competition from other scooter operators like Lime, Jump (Uber), Spin (Ford), and localized players internationally.
– The company aims to differentiate through superior vehicle design and technology like self-diagnostics and swappable batteries.
The electric scooter rental industry has seen hypergrowth over the past few years. Key industry trends include:
Massive market opportunity
– The global micromobility market is projected to grow from $40 billion today to over $300 billion by 2030 according to McKinsey.
– Rising urbanization, traffic congestion, environmental awareness, and Cheaper than rideshare create tailwinds.
– McKinsey estimates there will be up to 500 million shared micromobility vehicles by 2030.
Favorable regulatory environment
– Cities are increasingly adopting permissive regulations for scooter businesses to improve transportation options.
– Over 250 cities globally have scooter rental programs according to the NACTO.
– Integration with public transit networks is improving through partnerships.
Evolution of business models
– Operators are evolving towards better unit economics with subscription plans, swappable batteries, and improved scooter design.
– Fleet operations and logistics optimization using technology will be key.
– New revenue streams around advertising and data monetization are emerging.
The massive addressable market, positive regulatory momentum, and improving business models signal an attractive industry outlook. However, the market is becoming increasingly competitive.
Financial Performance and Projections
Now let’s examine BIRD’s recent financial performance and management projections to gauge the company’s growth and profitability potential.
Revenue Growth
– BIRD generated $188 million in revenue in 2021, up 220% year-over-year.
– Revenue growth was driven by a 152% increase in rides to over 44 million.
– In Q1 2022, revenue grew to $60 million, up 190% year-over-year. Rides grew 44% to 12.1 million.
– Management is guiding for over $400 million in 2022 revenue representing over 100% growth.
Margins and Profitability
– Gross margin improved from 12% in 2020 to 36% in 2021 indicating improving unit economics. But EBITDA margin was (112%) in 2021.
– BIRD is investing heavily in R&D and expansion into new markets leading to losses. The company had a 2021 net loss of $196 million.
– Management expects to generate positive EBITDA margins in 2023 through scale, pricing optimization, and cost improvements. But profitability remains distant.
Cash Flow and Balance Sheet
– BIRD burned through $196 million in cash from operations in 2021 and had just $38 million in cash at year-end.
– But the company has access to $150 million in cash from the SPAC merger providing a liquidity buffer.
– Long-term debt is minimal at $48 million. But BIRD may need additional capital if cash burn persists.
In summary, while revenue growth has been impressive, BIRD is still losing significant money as it scales up. The company appears to have a long pathway to profitability but a strengthening balance sheet aids liquidity.
Valuation Relative to Peers
With an understanding of the financials, let’s compare BIRD’s valuation multiples to relevant industry peers:
| Company | Market Cap | EV/Revenue | P/S |
|---|---|---|---|
| BIRD | $1.5 billion | 4.4x | 3.2x |
| Lime | $2.4 billion | 4.8x | 4.1x |
| Tier Mobility | $2.1 billion | 6.5x | 5.7x |
| Avg. Peer EV/Revenue | 5.6x | 4.9x |
Key takeaways:
– BIRD trades at a discount to peers on an EV/Revenue and P/S basis.
– The company’s growth justifies a premium multiple given 100%+ revenue growth.
– But discount vs. peers seems appropriate given weaker margins and profitability.
Overall, BIRD does not appear drastically undervalued relative to peers. The company trades at a reasonable valuation given its growth profile but still lacks profitability.
Potential Risks and Challenges
Although the growth opportunity is immense, investors should also assess the meaningful risks facing BIRD:
Execution risks in new markets
– BIRD is targeting expansion into hundreds of new cities to fuel growth. But new market launches carry risk.
– Navigating complex regulatory environments and achieving sufficient scale will be challenging.
Increasing competition
– The scooter rental market is getting saturated in some major cities like NYC and San Francisco.
– Lime leads with dominant share in key US markets, though BIRD contends in Europe.
– Automakers and Uber entering the market raises the competitive bar.
Unproven unit economics
– It remains uncertain if BIRD can generate sufficient contribution margins per ride to achieve profitable scale.
– While margins are improving, the level of losses indicates the jury is still out on unit economics.
Path to profitability unclear
– Management is guiding for positive EBITDA in 2023 but a net profit is further out.
– History shows unprofitable growth stories can turn south quickly if execution stumbles.
The bottom line is BIRD has a tremendously large opportunity but faces risks around competition, new market execution, unit economics, and achieving sustainable profits. The company has limited operating history as a public company to prove out its strategy.
Conclusion
In summary, BIRD exhibits very strong top line growth as it capitalizes on surging electric scooter adoption tailwinds. However, the company generates minimal gross profit per ride today and faces a long pathway to profitability amidst surging competition. While the valuation appears reasonable compared to peers, investors are still paying a premium for revenue growth without earnings.
Given the execution risks and unproven unit economics, the company’s upside potential seems fairly reflected at current levels following the steep sell-off. Less speculative investors may prefer to avoid BIRD stock until the company demonstrates a visible path to profits. But given the massive addressable market, BIRD could represent an attractive long-term opportunity if the company continues gaining share and improves margins over time. Investors will want to watch ridership trends, market expansions, and margin progression closely to gauge if BIRD’s growth story remains compelling as the competitive landscape intensifies.
