Lyft to Cut 17% of its Workforce Due to the Coronavirus Pandemic

Lyft Inc. (LYFT) plans to lay off 982 employees, or 17% of its workforce as the U.S. ride-hailing company seeks to lower operating costs and adjust cashflows to cope with economic hardships resulting from the impact of the coronavirus pandemic.

The San Francisco-based company said it expects to incur restructuring charges of about $28 million to $36 million in the second quarter, mainly because of employee severance and benefits costs related to the job cuts, it said in a regulatory filing.

The Uber (UBER) rival has seen its shares tumble about 30% in the past three months as coronavirus-related lockdown orders have significantly weakened demand for ride-sharing and transportation needs. Lyft’s shares rose 4% to $34.06 in U.S. trading on Wednesday.

As part of the one-time restructuring charges related to the cost-cutting program, Lyft plans to record a stock-based compensation charge and corresponding payroll tax expense linked to the equity compensation for employees who were terminated and a restructuring charge related to the shutdown of certain facilities. For now, Lyft said it isn’t able to provide an estimate for these charges as they partly depend on its future stock price. The disclosure of these additional charges will be filed in an amendment to the current filing, the company said.

Separately, Lyft has furloughed about 288 employees and has implemented base salary reductions for employees not affected by the layoffs and furloughs for a twelve-week period beginning in May. The salary reductions will consist of a 30% reduction for executive leadership, 20% for vice presidents and 10% for all other exempt employees. Directors of the company’s board have voluntarily agreed to forego 30% of their cash compensation for the second quarter of 2020.

Needham analyst Brad Erickson on Tuesday lowered Lyft’s price target to $41 from $48, while maintaining a Buy rating on the shares. Although Erickson cut his FY20 adj. EBITDA outlook on the company due to the early impact of COVID-19, he asserted that Lyft would also be among the first to show recovery.

Overall, Wall Street analysts have a bullish stance on Lyft’s stock. Twenty-two of 28 analysts have a Buy rating on the company’s shares and the remainder have a Hold rating adding up to a Strong Buy consensus rating. The $53.04 average price target implies 56% upside potential for the shares in the coming 12 months. (See Lyft stock analysis on TipRanks).

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