Lyft shares rocket 60% then level to 17% on margin correction, stock still up on positive forecasts

Lyft shares experienced a 67 percent surge but later retreated, losing most of the gains during a correction. In after-hours trading, approximately 47.8 million Lyft shares were traded, surpassing the stock’s usual daily volume of around 13.6 million shares in the last 50 regular trading sessions, as reported by Nasdaq and LSEG data, as per Reuters.

“The misstated margin prediction, which Lyft attributed to a clerical error, constitutes a black eye moment for Lyft. It’s a debacle of epic proportions. Never seen an error like this in my almost 25 years on the Street,” Dan Ives, an analyst at Wedbush Securities told Bloomberg.

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The company, in a conference call with its CFO Erin Brewer, corrected its profit margin expectation in 2024 from 500 basis points to 50 bps.

Notably, despite the downward revision, the stock has remained green as its earnings forecasts showed that the ride-hailing company’s efforts to enhance ridership and compete with industry giant Uber Technologies Inc. are showing promising results. It was also bolstered by other positive predictions.

The company anticipates adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) to range between $50 million and $55 million in the first quarter, surpassing analysts’ estimates of $49.5 million. Gross bookings for rides, excluding tips, are projected to be between $3.5 billion and $3.6 billion, exceeding estimates.

Overall Strong Performance in Q4

Lyft reported robust fourth-quarter results, with a 17 percent increase in gross bookings to $3.72 billion and revenue reaching $1.22 billion, a 4 percent year-on-year (YoY) increase. The number of active riders on the platform rose by 10 percent to 22.4 million in Q4, contributing to Lyft’s highest annual ridership in history.

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“Lyft’s outstanding fourth-quarter performance demonstrates our team’s incredible work to build a solid foundation for profitable growth. We’ve entered 2024 with a lot of momentum and a clear focus on operational excellence, which positions the company to drive meaningful margin expansion and our first full year of positive free cash flow,” CFO Brewer said.

Lyft’s CEO, David Risher, emphasized the success of cost-cutting measures, leading to positive outcomes. The company anticipates achieving positive free cash flow for the first time in 2024. Risher’s focus on operational excellence and strategic partnerships, including those with LinkedIn and Starbucks, aims to drive continued growth.

“As we can drive our scale north and hold our costs flat, we’re going to drop more money to the bottom line,” Risher told Reuters.

Battle with Uber Continues, Driver Struggles On

Despite positive strides, Lyft continues to trail Uber in market share, holding approximately 30 percent of the United States rideshare market compared to Uber’s 70 percent. Both companies, however, reported strong earnings for the quarter, indicating sustained growth in rider demand.

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Lyft’s initiatives to attract more drivers and riders include the Women Connect program, in-app video ads, and efforts to stabilize driver earnings. However, challenges persist, with drivers for both Uber and Lyft planning a strike on Valentine’s Day to protest low pay and perceived mistreatment.

Lyft’s shares have gained 15 percent in the past 12 months, trailing Uber, which has seen more than a 100 percent increase. The misstated margin prediction was attributed to a clerical error, prompting comments from analysts like Dan Ives of Wedbush Securities, who called it a “debacle of epic proportions.”

(With inputs from Bloomberg, Reuters)

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Published: 14 Feb 2024, 07:33 AM IST