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How much is Turo worth

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IAC owns a ~27% equity stake in Turo

As of the end of Q3/22, IAC holds a 26.7% interest in Turo on a fully diluted basis in the form of preferred shares. Turo is a privately owned company providing peer-to-peer car sharing marketplace akin to what airbnb provides for real estate rentals. Per Turo’s preliminary proxy filing of Dec 14, 2022, the company is currently the largest car sharing marketplace globally. As of twelve months ending Q3/22, the platform boasts 160,000 active hosts, 300k vehicles active across 10,000+ cities in Canada, UK, France, US, Australia as recent launch in Nov 2022, and 2.7+  million active guests that grew 110% y/y. The company launched in 2010.

IAC’s cost basis associated with this ownership is approximately $275 million by my estimate, based on IAC’s disclosures of purchases made in July 2019 (initial stake), Q4/20, Q1/21, and H2/21.

Source: Turo prelim proxy, my estimates

Turo performance steller; I estimate fair value above IAC's cost basis

The implied full equity of Turo at cost would be ~$1 billion in July 2019 at IAC’s initial investment, but how much is Turo really worth as of Jan 2023? My analysis points to a Turo equity fair value of $2.4 billion. This implies IAC’s stake in Turo is currently worth $5.8 per IAC common share.
 
Performance over the past 3 years has been positive and appears evidently progressing in a blossoming direction. Net revenue has grown consecutively y/y. Even for FY2020 in which Turo competitors experienced revenue decline on a y/y basis, Turo’s revenue grew. Emerging out of the worst phase economic disruptions in 2020, Turo then more than tripled revenue from 2020 to 2021. For full year 2022, revenue is set for another healthy upsurge from the previous year as YTD Q3/22 revenue has been disclosed to have grown ~70% y/y. In my opinion, the past few years of resilient topline growth momentum amidst a particularly tumultuous environment substantiates the attractive prospects of the Turo business model. 

Meanwhile, cost margin continues to shrink on an expanding revenue base. The company became EBITDA positive in 2021 as every categories of costs (G&A, sales & marketing, product development, and Ops support) declined % of revenue. Though no guidance has been provided, I believe that as revenue continues the current growth trajectory, EBITDA margin would improve further. This expected bottom line growth thus presents as positive catalyst in addition to the topline growth.
Source: Turo Proxy
Correspondingly, traffic on the site kept growing as more users join and utilize the platform. Turo presents in the proxy two key business metrics. Days is defined as total days for a vehicle booked by guests in a given period net of cancellations. Gross Book Value is defined as the total value collected from guests for the Days booked on the platform. Both metrics have steadily improved over the past 3 years.
Source: Turo Proxy

Forecast for the future

Nonetheless, it’s difficult to surmise what the future holds in store for Turo. With relatively scarce disclosures available, the only line items that I’d propose to forecast with passing threshold of reliability are the FY2022 and at most FY2023 net revenue figures. Q1 to Q3 2022 revenue grew 69% from same period of 2021. Historically over the past 3 years, Q4 revenue constituted 27% to 29% of FY revenue, so bearing these relationships, I estimate Y2022 revenue at ~$800 million (with Q4 revenue amounting to 30% of FY revenue). This would result in a 70% revenue growth for 2022. Consensus estimates on Turo’s competitors imply a sequentially deteriorating year for the car renting industry in 2023 with essentially flattish growth. 

Still, on account of Turo having grown 6% in 2020 while a list of pubic peers collectively experienced a 40%+ revenue decline, I’d contend that Turo will continue to grow in 2023, albeit at decelerating pace. Based on this consideration, I broad-stroke FY2023 revenue growth at 25% from 2022 (down from 70% for 2022).

Turo Comps

For comps, Turo’s publicly traded car-renting peers that I came across are Avis Budget Group, Hertz, HyreCar, Sixt Rent-a-car, and Getaround. Uber and Lyft can be also thought of as a adjacent competitors as both companies predominantly generate revenue from providing non-ownership transportation services substitutable with car-renting.

 
I would argue that Turo’s should be benched against its large car rental peers which have the most similar business model vis-a-vis Turo. In my opinion, compared to these peers, Turo deserves a premium multiple because the company’s airbnb model for car-rental has been successfully gaining traction while its legacy car-rentals have struggled in recent years. 
Source: Turo Dec 2022 prelim proxy

This divergence in performance in my estimation appears to at least partially stem from Turo’s rental model, which I view as superior and more convenient than are traditional car rental model in which renters undergo a more tedious process for renting a car. 

Over the past 3 years, Turo has already achieved better growth. Further, heading into 2023, I’d project Turo to continue growing quicker than do peers given its model and as there continues to be a supply shortage in rental cars – a positive for Turo but an overhang for the legacy car rental peers. The semiconductor shortage impinging new vehicles production also lingers, further exacerbating vehicle shortages that may impede vehicle purchases, thus shifting traveller demand to the rental bucket, in which I’d content that Turo is better positioned to serve than would traditional model car rentals.

Turo Valuation

Turo’s publicly traded car rental peers are trading at roughly 2.1x FY2022 revenue. Applying a slight (probably conservative) premium of 2.5x to my Turo’s FY2022 revenue estimate, I arrive at ~$2 billion enterprise value or $2.3 billion equity fair value for Turo. 
Source: Consensus figures for peers and my own estimate for Turo

IAC's Turo stake equates to $5.8/sh IAC share

Based on Turo’s Dec 2022 disclosure of share count including dilutive securities and IAC’s ownership equivalent to 67,523,796 Turo common stock, IAC’s Turo stake would be worth ~$520 million. This implies ~$5.8 per IAC share per 88,856,377 IAC shares outstanding on Nov 4, 2022.
Turo stake
Source: My estimate based on disclosures in Turo Proxy
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IAC owns a ~27% equity stake in Turo

As of the end of Q3/22, IAC holds a 26.7% interest in Turo on a fully diluted basis in the form of preferred shares. Turo is a privately owned company providing peer-to-peer car sharing marketplace akin to what airbnb provides for real estate rentals. Per Turo’s preliminary proxy filing of Dec 14, 2022, the company is currently the largest car sharing marketplace globally. As of twelve months ending Q3/22, the platform boasts 160,000 active hosts, 300k vehicles active across 10,000+ cities in Canada, UK, France, US, Australia as recent launch in Nov 2022, and 2.7+  million active guests that grew 110% y/y. The company launched in 2010.

IAC’s cost basis associated with this ownership is approximately $275 million by my estimate, based on IAC’s disclosures of purchases made in July 2019 (initial stake), Q4/20, Q1/21, and H2/21.

Source: Turo prelim proxy, my estimates

Turo performance steller; I estimate fair value above IAC's cost basis

The implied full equity of Turo at cost would be ~$1 billion in July 2019 at IAC’s initial investment, but how much is Turo really worth as of Jan 2023? My analysis points to a Turo equity fair value of $2.4 billion. This implies IAC’s stake in Turo is currently worth $5.8 per IAC common share.
 
Performance over the past 3 years has been positive and appears evidently progressing in a blossoming direction. Net revenue has grown consecutively y/y. Even for FY2020 in which Turo competitors experienced revenue decline on a y/y basis, Turo’s revenue grew. Emerging out of the worst phase economic disruptions in 2020, Turo then more than tripled revenue from 2020 to 2021. For full year 2022, revenue is set for another healthy upsurge from the previous year as YTD Q3/22 revenue has been disclosed to have grown ~70% y/y. In my opinion, the past few years of resilient topline growth momentum amidst a particularly tumultuous environment substantiates the attractive prospects of the Turo business model. 

Meanwhile, cost margin continues to shrink on an expanding revenue base. The company became EBITDA positive in 2021 as every categories of costs (G&A, sales & marketing, product development, and Ops support) declined % of revenue. Though no guidance has been provided, I believe that as revenue continues the current growth trajectory, EBITDA margin would improve further. This expected bottom line growth thus presents as positive catalyst in addition to the topline growth.
Source: Turo Proxy
Correspondingly, traffic on the site kept growing as more users join and utilize the platform. Turo presents in the proxy two key business metrics. Days is defined as total days for a vehicle booked by guests in a given period net of cancellations. Gross Book Value is defined as the total value collected from guests for the Days booked on the platform. Both metrics have steadily improved over the past 3 years.
Source: Turo Proxy

Forecast for the future

Nonetheless, it’s difficult to surmise what the future holds in store for Turo. With relatively scarce disclosures available, the only line items that I’d propose to forecast with passing threshold of reliability are the FY2022 and at most FY2023 net revenue figures. Q1 to Q3 2022 revenue grew 69% from same period of 2021. Historically over the past 3 years, Q4 revenue constituted 27% to 29% of FY revenue, so bearing these relationships, I estimate Y2022 revenue at ~$800 million (with Q4 revenue amounting to 30% of FY revenue). This would result in a 70% revenue growth for 2022. Consensus estimates on Turo’s competitors imply a sequentially deteriorating year for the car renting industry in 2023 with essentially flattish growth. 

Still, on account of Turo having grown 6% in 2020 while a list of pubic peers collectively experienced a 40%+ revenue decline, I’d contend that Turo will continue to grow in 2023, albeit at decelerating pace. Based on this consideration, I broad-stroke FY2023 revenue growth at 25% from 2022 (down from 70% for 2022).

Turo Comps

For comps, Turo’s publicly traded car-renting peers that I came across are Avis Budget Group, Hertz, HyreCar, Sixt Rent-a-car, and Getaround. Uber and Lyft can be also thought of as a adjacent competitors as both companies predominantly generate revenue from providing non-ownership transportation services substitutable with car-renting.

 
I would argue that Turo’s should be benched against its large car rental peers which have the most similar business model vis-a-vis Turo. In my opinion, compared to these peers, Turo deserves a premium multiple because the company’s airbnb model for car-rental has been successfully gaining traction while its legacy car-rentals have struggled in recent years. 
Source: Turo Dec 2022 prelim proxy

This divergence in performance in my estimation appears to at least partially stem from Turo’s rental model, which I view as superior and more convenient than are traditional car rental model in which renters undergo a more tedious process for renting a car. 

Over the past 3 years, Turo has already achieved better growth. Further, heading into 2023, I’d project Turo to continue growing quicker than do peers given its model and as there continues to be a supply shortage in rental cars – a positive for Turo but an overhang for the legacy car rental peers. The semiconductor shortage impinging new vehicles production also lingers, further exacerbating vehicle shortages that may impede vehicle purchases, thus shifting traveller demand to the rental bucket, in which I’d content that Turo is better positioned to serve than would traditional model car rentals.

Turo Valuation

Turo’s publicly traded car rental peers are trading at roughly 2.1x FY2022 revenue. Applying a slight (probably conservative) premium of 2.5x to my Turo’s FY2022 revenue estimate, I arrive at ~$2 billion enterprise value or $2.3 billion equity fair value for Turo. 
Source: Consensus figures for peers and my own estimate for Turo

IAC's Turo stake equates to $5.8/sh IAC share

Based on Turo’s Dec 2022 disclosure of share count including dilutive securities and IAC’s ownership equivalent to 67,523,796 Turo common stock, IAC’s Turo stake would be worth ~$520 million. This implies ~$5.8 per IAC share per 88,856,377 IAC shares outstanding on Nov 4, 2022.
Turo stake
Source: My estimate based on disclosures in Turo Proxy

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