Is now an ideal time to ride Lyft’s (LYFT) recovery? This question, and other questions, will be one of several topics that the company must address when it reports first quarter fiscal 2022 earnings results after Tuesday’s closing bell.
Although the stock is down 21% year-to-date and 47% over the last 12 months, there are still tons of catalysts to propel Lyft higher and for the company sustain growth over the long term. Aside from healthy growth in GDP, there is a noticeable shift in discretionary consumer spending that is going away from goods towards areas such as travel, dining and entertainment. Rising inflation is one reason for this. While it’s a headwind for consumers, it stands to benefit Lyft, along with the rebound in corporate travel.
Yet shares of the ride-sharing pioneer, which are trading at 52-week lows, have discounted these potential signals. To be sure, the company didn’t excite investors when it issued Q1 guidance in its last earnings report which forecasted revenue to decrease by 12% to 18% sequentially, while its adjusted Q1 profit to be in the $5-15 million range. For some context, that would be a significant decline from $75 million in Q4. Investors will keep a watchful eye on these metrics on Tuesday. For the stock to rebound, Lyft not only must deliver a top- and bottom-line beat, it also needs upside guidance that lays out a path towards stronger profitability.
For the quarter that ended March, Wall Street expect Lyft to lose 7 cents per share on revenue of $846 million. This compares to the year-ago quarter when it reported a loss of 35 cents per share on revenue of $608.96 million. For the full year, ending in December, the company is expected to earn 62 cents per share, compared to 25-cent per share loss a year ago, while full-year revenue is expected to rise 32% year over year to $4.25 billion.
As with its chief rival Uber (UBER), Lyft is still waiting for demand to recover to pre-pandemic levels. In terms of operating performance in the quarters ahead, Lyft has demonstrated it is well-positioned to capture market share and outperform growth expectations. The execution has been solid evidenced by increases in both revenue per rider and active riders which have trended well over the past several quarters. The company has also done a solid job improving its cash flow profile which also reduces some of the near term risk.
The projected full-year revenue increase of almost 35% is impressive, given that the estimate has been rising over the past several weeks even as the stock has been under pressure. Meanwhile, its revenue have recovered and surpassed its pre-pandemic high. From a profitability perspective, that’s where the company must show strong improvement. Lyft's cost-cutting initiatives to drive improved profitability is having a strong effect. In Q4, the company beat on both the top and bottom lines, thanks to strong diver metrics.
Lyft posted its third straight quarter of positive adjusted EBITDA profitability. Q4 adjusted EBITDA turned positive by $75 million. Not only was this 3% better than the midpoint of the company’s, it revered the year-ago loss of $150 million. Just as impressive, Lyft’s Q4 revenue surged 70% year over year to $970 million, topping its own revenue guidance of $935 million. All told, Lyft management is pushing all of the right buttons. And with the stock trading some 70% below its price target of $56, now would be an ideal time to ride Lyft’s recovery.
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.
Read Richard's Bio