Shares of Lyft (LYFT) haven’t enjoyed the successes of recent tech IPOs such as Pinterest (PINS) and Zoom (ZM), but the country's No. 2 ride-sharing service will look to turn its fortunes around on Tuesday when it delivers first quarter earnings results after the closing bell.
This will be Lyft’s first earnings report as a public company since its late-March initial public offering. And the reaction to the results will likely set the tone for what investors should expect with larger rival Uber begins trading on Friday. Lyft shares have lost about 24% over the course of the past thirty days, driven by concerns about the company's profitability. Excitement about the company has faded due to the fact that Lyft is losing close to $1 billion annually as it continues to invest heavily in its infrastructure. I see this as a buying opportunity.
Lyft is still a young company in a new and potentially booming industry. There are several metrics that suggest the stock may yet be undervalued. Namely, the company’s U.S. market share as of December 2018 reached 39%, which represents an increase of 17 percentage points from the 22% it had in December 2016. What’s more, the company had 18.6 million “Active Riders” and over 1.1 million drivers for the quarter ended December 31, 2018 — both well above 2017 levels. And a solid earnings report Tuesday could push the shares back to their IPO levels of $72.
For the quarter that ended March, Wall Street expect Lyft to post a per-share loss of $1.81 per share on revenue of $740.21 million. In the same period a year ago, Lyft recorded $397.2 million in revenue. For the full year, ending in December, the loss is expected to be $4.47 per share, while full-year revenue is expected to rise 52% year over year to $3.28 billion.
The top- and bottom-line numbers won’t be the only metrics that matter to this story. As noted, Lyft and Uber have been in a heated battle for both drivers and customers, particularly ahead of their respective IPOs. This battle included heavy promotions on riders. These cheap rides were in an effort to boost their respective market share. The company’s take rate, or the amount of each fare that Lyft retains, will be another key metric to keep an eye on.
On Tuesday analysts will what to see to what extent these promotions factored into Lyft’s earnings results? The other topic will the the guidance for the just-begun quarter and full year. Analysts and investors will want to know the direction the management take with the promotions and heavy discounting. Will they continue in an effort to gain market share or will they scale back to boost profitability?
Elsewhere, analysts will also want to know about the progress of the company’s other revenue streams such as docked bikes and scooters. These businesses don’t yet generate the soft of revenue Lyft would like to disclose, yet they incur costs to build up. Understanding the growth strategy in these areas, as well as the company’s enterprise business (offering rides doctor’s appointments or job interviews) could make investors feel less concerned about Lyft’s stock price and more comfortable about the company’s direction.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Richard Saintvilus
After having spent 20 years in the IT industry serving in various roles from system administration to network engineer, Richard Saintvilus became a finance writer, covering the investor's view on the premise that everyone deserves a level playing field. His background as an engineer with strong analytical skills helps him provide actionable insights to investors. Saintvilus is a Warren Buffett disciple who bases his investment decisions on the quality of a company's management, its growth prospects, return on equity and other metrics, including price-to-earnings ratios. He employs conservative strategies to increase capital, while keeping a watchful eye on macro-economic events to mitigate downside risk. Saintvilus' work has been featured on CNBC, Yahoo! Finance, MSN Money, Forbes, Motley Fool and numerous other outlets. You can follow him on Twitter at @Richard_STv.
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