Go ahead sport, party like it’s the 1999 tech stock boom again and go all in on Lyft within the first few frenzied minutes of trading on Friday. Hey, at least Lyft has cash on its balance sheet unlike the trash tech stocks pitched by Red Bull-chugging hucksters working at boiler rooms in the late ‘90s.

But get into the mix with one eye toward getting rich at your own risk. Because if Lyft doesn’t solve one serious issue that will probably make its initial financial reports valuable lessons on calculating losses, then one of the hottest IPOs (Lyft priced its stock at $72 per share, valuing it at more than $20 billion.) in some time could hit dud status within a year (not unlike Snapchat).

The main issue here: Lyft has not proven that it has a clear path to profitability. That calls into question a valuation on Lyft that may eclipse $25 billion on day one of trading (and the inevitable upward bias in following sessions).

While Lyft saw sales more than double to $2.2 billion in 2018, it lost about $911 million. That’s despite Lyft’s bookings surging 76% year-over-year to $8 billion. Investors often give early stage tech companies a pass for their losses on the expectation of profits not too far in the distant future. And Lyft is surely asking new investors for that pass.

In fact, Lyft’s losses have worsened in recent years. Lyft’s operating losses tallied $977.8 million in 2018, up from $708.3 million in 2017. Some structural reasons explain the losses.

Lyft’s road to profitability

First, intense competition from larger rival Uber has forced Lyft to offer more incentives to drivers and riders. D.A. Davidson analyst Tom White notes Lyft provided $837 million in overall incentives to drivers and riders in 2018, up an astounding 55% from the prior year.

“Meaningfully reducing its use of driver/rider incentives may prove difficult in the near-term for Lyft, given that the U.S. is arguably the most competitive large ride-sharing market in the world. Along with the years of losses, the path to profitability is highly unclear,” says White.

Couple the price war Lyft is enduring with the aggressive investments in its ride-sharing platform, autonomous driving technology and bike-sharing brand Motivate, Lyft has a lot to prove to investors. White doesn’t see Lyft turning a profit for the next “several years.”

“It remains unclear whether Lyft can be profitable as the No. 2 player in U.S. ride-sharing, while still paying its drivers,” adds White.

One thing that could help reduce fears on Lyft achieving profitability is greater marketing of its subscription model. Lyft already offers some commuter plans, all-access plans, and personal plans.

“This [subscription model] will increase the stickiness of the platform, increase brand loyalty, and add a profitable visible revenue stream for Lyft that will be a key ingredient in its future recipe for success,” writes Wedbush analyst Dan Ives.

Happy first day of trading, Lyft fans.

Brian Sozzi is an editor-at-large at Yahoo Finance. Follow him on Twitter @BrianSozzi

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