Lyft (LYFT) stock has gone on a nice ride over the past six months, delivering more than 15% returns. The country's No. 2 ride-sharing service will set out to prove that those gains are not only warranted, but also sustainable when it reports fourth quarter fiscal 2019 earnings results after Tuesday’s closing bell.
The company’s Q3 EBITDA miss sent the stock down more than 3% in November. Concerns about profitability and quarterly operating losses has plagued the stock since last year’s IPO. The predicament is the same for its chief competitor Uber (UBER). But as Lyft is spending to invest in its infrastructure, it’s getting decent returns on those investments, evidenced by the 28% rise in Q3 active riders, while revenue per active rider rose 27% to $42.82.
What’s more, the company’s 63% revenue surge in Q3 suggests growth expenditures are working. Investors would nonetheless be more pleased noticeable signs of profits. To that end, the company is also working to curtail costs on other loss-making aspects of the business. On Tuesday if Lyft can deliver a top- and bottom-line beat, while guiding lower capex, the shares may drive back to their IPO level of $72.
For the quarter that ended December, Wall Street expect Lyft to post a per-share loss of 53 cents per share on revenue of $984.17 million. This compares to the previous quarter when it reported a loss of 41 cents per share on revenue of $955.6 million. For the full year, the loss is expected to be $11.56 per share, while full-year revenue is expected to rise 66% year over year to $3.58 billion.
The fact that full-year revenue is expected to rise 66% highlights not only the company’s growth potential, but also how nascent its addressable market remains. As noted, the company has invested heavily in an effort to capitalize on this opportunity. As such, on Tuesday investors will want more return on that spend. Lyft will need to produce another strong showing in active riders - defined as riders who take at least one ride during a quarter on Lyft’s platform through its app.
Consensus estimates calls for a better-than 2% rise of active riders from the third quarter, which — if achieved — could lead to a solid revenue beat. In Q3 the management had guided for Q4 revenue in the range of $975 million to $985 million. The question is profitability where the company guided for adjusted EBITDA loss in the range of $160 to $170 million. The good news is, in Q3 the company beat earnings by more than 40% with narrower-than-expected loss. Likewise, Q3 revenues soared 63%. Investors will want to see if Lyft can build on that performance.
Notably, in Uber’s recent earnings, the company announced plans to decreased Capex on promotions and driver incentives in a bid to accelerate profitability. The news sent the stock 10% higher, which also aided Lyft by more than 5%. Investors expect Lyft on Tuesday to make similar commitment towards profitability, which should push the stock higher perhaps towards its IPO high of $70+, particularly if combined with sustained increases in active riders.
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