Lyft Analysts React To Q2 Guidance Miss, Heavy Investments In Lagging Driver Recovery

LYFT Inc LYFT shares plummeted 32% on Wednesday after the company issued second-quarter guidance that came up well short of market expectations.

On Wednesday, Lyft reported first-quarter adjusted EPS of 7 cents, beating consensus analyst estimates of a 7-cent loss. First-quarter revenue was $876 million, also beating analyst expectations of $846 million. Revenue was up 44% from a year ago.

Lyft reported 17.8 million active riders, missing analysts estimates of 17.9 million. The company reported first-quarter revenue per active rider of $49.18, beating analyst expectations of $47.07.

Unfortunately, Lyft's guidance for second-quarter revenue of between $950 million and $1 billion came up significantly short of Wall Street estimates of $1.02 billion.

Market Overreaction: RBC Capital Markets analyst Brad Erickson said Lyft's earnings report and earnings call were tough, but the huge sell-off in the stock is an overreaction.

"Re-openers are clearly struggling through this earnings season, however, we view the prospect for ongoing top-line momentum and bottom-line upside as underappreciated," Erickson wrote.

Raymond James analyst Aaron Kessler said Lyft's first-quarter numbers were solid, but increased investments are weighing on profitability.

"While positive on longer-term fundamentals, we believe shares are fairly valued at current levels (~3x 2022 EV/gross profits based on after-hours price) given the increased level of investment impacting the margin outlook," Kessler wrote.

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Spending Spree: Needham analyst Bernie McTernan said Lyft is being forced to invest in drivers as driver supply has not recovered as quickly as ride demand.

"Based on after hours pricing with the stock down -25%, the stock is trading <10x our NTM adj. EBITDA estimate, although increasing investment levels increase the uncertainty in this estimate," McTernan wrote.

Wedbush analyst Ygal Arounian said Lyft's spending spree is clearly not sitting well with investors.

"This quagmire of spending to get drivers back onto the platform is a necessary evil to propel the Lyft story into its next stage of growth," Arounian wrote.

Ratings And Price Targets:

• RBC Capital Markets has an Outperform rating and $42 target.
• Raymond James has a Market Perform rating.
• Needham has a Hold rating.
• Wedbush has an Outperform rating and $32 target.

Photo: Courtesy of Allie Michelle on Flickr