Lyft Sees Recovery Path After 4Q Sales Outperform; Shares Spike 13%

Shares of Lyft jumped 13% in pre-market trading on Feb. 10 as the ride-sharing company reported better-than-feared fourth quarter results and sees a recovery in demand starting in the second quarter of this year.

“While the first quarter of 2021 continues to be uncertain primarily due to COVID-19 headwinds, based on current recovery expectations, we should experience a growth inflection beginning in the second quarter that strengthens in the second half of the year,” Lyft CFO Brian Roberts said.

Meanwhile, Lyft’s (LYFT) revenues in the fourth quarter dropped 44% to $570 million year-on-year but exceeded consensus estimates of $562.5 million. The company posted an adjusted net loss per share of $0.58, which is smaller than the loss of $0.72 forecasted by analysts. Revenue per active rider rose by 2.3% year-on-year to $45.40.

Lyft’s CEO Logan Green commented, “…we continued to focus on improving our business for the long-term. Even as we’ve strengthened our financial position, we’ve continued to fund strategic investments that build on our core competencies and on our marketplace flywheel, to lower costs and deliver more value to drivers, riders and partners.”

Lyft’s revenues in the latter part of the fourth quarter were negatively affected by the rise in COVID-19 cases and the reintroduction of travel restrictions to curb the spread of the virus. (See Lyft stock analysis on TipRanks)

The company’s cost reduction efforts also paid off in the fourth quarter. It cut fixed costs of $360 million on an annualized basis exceeding its cost reduction target by 20%.

On Feb. 8, Jefferies analyst Brent Thill reiterated a Buy rating and a price target of $70 on the stock following a rideshare survey that indicated lack of widespread vaccination as the main reason for not using a rideshare. Thill believes that a rise in vaccination numbers should remove this fear and increase the use of the ridesharing app.

Thill added, “although a significant recovery might not occur until inoculation is widespread. We currently model 4Q21 for revs [revenues] to return to pre-COVID levels of ~$1Bn.”

The rest of the Street is bullish about the stock with a Strong Buy consensus rating. That’s based on 20 analysts recommending a Buy and 4 analysts suggesting a Hold. The average analyst price target of $57.14 implies 6.5% upside potential to current levels.

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