Shares in Lyft (LYFT) rose 5% in Tuesday’s after-hours trading, after the company provided an encouraging update on May business trends and on its Adjusted EBITDA outlook for the second quarter.
Rides on Lyft’s rideshare platform in May 2020 increased 26% versus April 2020, although they were still down 70% year-over-year.
Rideshare rides have increased week-over-week for 7 consecutive weeks since the week ended April 12, 2020, Lyft also revealed. In the week ended May 31, 2020 rideshare rides were down approximately 66% versus the year ago period and increased 5.5% versus the prior week.
Recent monthly rideshare ride growth has been stronger in specific cities where restrictions on social activities and visiting business venues have been eased, says Lyft. For example, rideshare rides increased 73% in Austin, 41% in Denver, 54% in Las Vegas, and 59% in Miami, in May versus April. In addition, bike rides on the Lyft platform increased 118% in May 2020 versus April 2020.
Given the stronger performance in May 2020 versus April 2020, Lyft now expects that its Adjusted EBITDA loss for the second quarter will not exceed $325 million if average daily rideshare ride volume in June is unchanged from May- a roughly 10% improvement relative to the company’s prior expectation of a loss not exceeding $360 million.
Lyft also pointed out that it has taken further steps to improve its financial position. In May, Lyft completed a convertible debt offering, along with corresponding capped call transactions. On a pro forma basis for these transactions, Lyft held approximately $3.3 billion of unrestricted cash, cash equivalents and short-term investments as of March 31, 2020.
Overall the Street has a cautiously optimistic take on LYFT with a Moderate Buy consensus and $43 average analyst price target (35% upside potential).(See Lyft stock analysis on TipRanks) Shares have plunged 26% year-to-date, but RBC Capital analyst Mark Mahaney argues that Lyft “should be a very good Rebound Stock.”
“As SIP restrictions are lifted, we expect Rides demand to recover to full growth by H1:21” he says, adding “In the meantime, we believe LYFT’s scale to profitability is improving. Thanks to $300MM in additional fixed expenses, LYFT believes that it can now achieve EBITDA profitability with 15%-20% lower Ride volume than it previously modeled.” Mahaney has a buy rating on the stock and $51 price target (61% upside potential).
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