lyft

Lyft stock (NYSE: LYFT) is down almost 35% today and is only a tad short of its all-time lows after the company reported disappointing earnings for the fourth quarter and also provided tepid guidance for the first quarter of 2023.

Multiple analysts downgraded the stock after the report and lowered their target prices.

Lyft reported revenues of $1.18 billion in the quarter which was slightly ahead of what analysts were expecting. The company’s revenues rose 21% YoY and hit a record high. In the full year, the company’s revenues increased 28% YoY to $4.1 billion.

Lyft however posted a net loss of $1.6 billion in the year which included $767.8 million of stock-based compensation and related payroll tax expenses.

It reported 20.3 million active riders in the fourth quarter which was similar to the previous quarter but 8.7% higher than the corresponding quarter in 2021. The company’s active riders haven’t yet risen to pre-pandemic levels and it had 22.9 million active riders in Q4 2019.

Meanwhile, the biggest disappointment in Lyft’s earnings call was the first-quarter guidance. It forecast revenues of $975 million and adjusted EBITDA of between $5 million-$15 million. Analysts were expecting the revenues at almost $1.1 billion.

Both Uber and Lyft have been struggling with profits. Lyft stock trades at a fraction of its 2019 IPO price. There is a list of some of the upcoming IPOs.

Lyft Stock Crashes After Tepid Guidance

In her prepared remarks, Lyft CFO Elaine Paul said, “our Q1 guidance is the result of seasonality and lower prices, including less Prime Time. Additionally, our different insurance renewal timing puts differently timed pressure on our P&L.”

Lyft said that it is now revising the insurance reserve requirements for prior periods. It said, “Under our updated non-GAAP calculation, Adjusted EBITDA was a negative $248.3 million versus a negative $47.6 million in the fourth quarter of 2021 and a negative $26.7 million in the third quarter of 2022.”

Uber Posted Better Than Expected Earnings

Lyft’s earnings and guidance are in stark contrast to rival Uber. Uber reported gross bookings of $30.7 billion in Q4 2022 which is 19% higher than the corresponding quarter in the previous year. Its revenues increased a whopping 49% YoY to $8.6 billion.

Along with posting better-than-expected revenues and profits, Uber also provided strong guidance. In constant currency, it expects its revenues to rise between 20-24% in Q1 2023. In absolute terms, it would mean gross booking between $31 billion-$32 billion.

The company forecast adjusted EBITDA between $660 million-$700 million. The guidance surpassed analysts’ estimate of $612 million in adjusted EBITDA.

Earlier this week, Bank of America issued a bullish note and advised buying Uber stock.

Analysts Downgrade Lyft Stock

After Lyft’s earnings release, multiple analysts downgraded the stock. JPMorgan’s Doug Anmuth downgraded Lyft stock from overweight to neutral and slashed his target price from $29 to $15.

“Our positive thesis on Lyft had been based on post-pandemic recovery combined with an accelerated shift to profit through cost rationalization. However, rideshare is now approaching full recovery in the US, but Lyft is not,” said Anmuth in his note.

Youssef Squali of Truist also downgraded Lyft stock from a buy to hold and said, “Competitive pressures have intensified with Uber in Jan. with Lyft lowering its base pricing to better compete, but pressuring revenue growth. Lower profitability in 1Q23 is driven by lower revenue and higher insurance costs, which seems to be more of a structural issue for Lyft than for Uber (Buy).”

Loop Capital and KeyBanc also downgraded Lyft stock from buy to hold as the company’s guidance disappointed even the hardcore bulls.

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