Lyft Stock Explodes as Profitability Looms on Narrowing Net Loss

Feb 14, 2024

Lyft shares are flying high again after pulling back on Wednesday as the company’s chief acknowledged a major error on the earnings call. The stock had initially rallied by over 60% after management forecasted a 500 basis points or 5% expansion in adjusted earnings margin in 2024. The stock gave up some gains as the company issued a correct figure reiterating that it meant a 50 basis point increase or 0.5% instead of 5%.

Lyft Stellar Results

After initially reaching the $ 20-a-share level, the stock pulled back but again started edging higher, going by the 30% plus rally in the early Wednesday trading session. The renewed investor interest in the ride-hailing company comes amid growing expectations that the ride-hailing is closing in on a positive free cash flow milestone for the first time. Despite the blockbuster rally, the stock is still down by about 70% from its IPO price.

The company is fresh from delivering adjusted earnings of 18 cents a share in its latest quarter, better than analysts expected 8 cents a share. Revenue came in at $1.2 billion, in line with consensus expectations, and up by 4% year over year. While the company has yet to achieve profitability, its fourth quarter and full-year earnings report show that losses are increasingly coming down.

The company delivered a much lower net loss of $26.3 million in the fourth quarter, a significant improvement from a net loss of $588 million delivered in the same quarter in 2022. Full-year net loss fell to $340.3 million in 2023 from highs of $1.6 billion in 2022.

In the earnings calls, the company reiterated that it expects to generate positive free cash flow in 2024, which will be a first in its history. The race to profitability comes on ride. The hailing company reiterates that it expects gross bookings to reach highs of $3.6 billion in the first quarter.

Lyft Road to Profitability

Ever since the company went public in 2019, it has struggled to generate free cash flow, with businesses bleeding cash significantly. A good chunk of the company’s earnings has gone towards paying drivers and strengthening the competitive edge against Uber. Nevertheless, the efforts and investments are increasingly paying off as the company raced to a record number of annual riders.

In addition, Lyft saw the number of rides recorded on its platform increase by 26% to record highs of 191 million in the fourth quarter. The company has also succeeded in attracting more active riders into the platform, going by a 10% increase in the quarter to 22.4 million. Consequently, gross booking for the full year increased 14% to $13.8 billion as quarterly bookings increased 17% to $3.7 billion.

Lyft hopes to follow in the footsteps of its fierce rival Uber, which turned its first profit in 2023. Uber generated $1.9 billion in profit, a significant improvement from a net loss of $9.1 billion in 2022. Fortunes in the sector have improved significantly on the opening up of the economy following the COVID-19 slowdown. The ride-hailing companies are also benefiting from a resilient economy that has so far stayed clear of recessions as consumer spending power remains strong.

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