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Online taxi services are among those affected by the coronavirus crisis that has devastated the entire transportation industry. As the business world emerges from the downturn caused by the pandemic, ride-hailing platform Lyft, Inc. (NASDAQ: LYFT) is struggling to get back on track. The company, which became a public entity more than three years ago, has yet to turn a profit.
Lyft’s turnover prospects have been dampened by restrictions on movement related to COVID and causing traffic. Meanwhile, in a sign that the company is on the road to recovery, the number of riders has continued to rise since the pandemic recovered. There has been a corresponding increase in revenue.
Read management/analyst commentary on Lyft’s Q4 2022 financial results
Lyft’s poor financial performance has dampened investor sentiment, and the stock has been in free fall for two years. Weak fourth-quarter results and a bleak outlook for the first quarter of 2023 added to the stock’s decline, sending it down 35% after last week’s announcement. From an investment perspective, LYFT has become very cheap after the decline, but its weakness makes it a risky bet.
Headwind
The main obstacles to a sustainable recovery are increased competition, especially from main rival Uber Technologies Inc (NYSE: UBER ), price pressures, and seasonal factors affecting vehicle rentals. As such, Lyft is currently a laggard among its peers. A recent slowdown in ridership additions and a lack of drivers burdened operations, at the time of introduction increase prices making the platform more expensive.
“Relatively three months ago, the competitive dynamics changed. And the better market balance that we see now, creates a significant opportunity for long-term growth. To take advantage of this opportunity and grow the market, we must prioritize competitive service levels. This will lead to 2024 adjusted EBITDA and free cash flow targets. We are evaluating the impact of these changes and are actively reviewing adjustments to the business, including cost reduction measures,” said Lyft CEO Logan Green during a recent interaction with analysts.
Surprise Loss
In the fourth quarter of 2022, the company reported a net loss of $588.1 million, marking a decline from the previous year’s period when it lost $283.2 million. Excluding one-time items, they posted a loss of $270.8 million, not taking into account expectations for positive earnings. The larger loss mainly reflects the revision of calculations for Earnings before Interest, Taxes, Depreciation, and Amortization to comply with SEC regulations.
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Meanwhile, total revenue increased 21% year over year to a record high of $1.2 billion, helped by an increase in the number of active riders and higher revenue per user. Taking cues from the slow recovery, management issued first-quarter 2023 revenue guidance below analysts’ estimates.
Peer Achievement
Earlier, Uber reported 49% growth in fourth-quarter revenue, which was higher than consensus estimates. Although net profit declined, due to increased operating expenses, the bottom line exceeded expectations.
After hitting rock bottom last year, Lyft stock entered 2023 on an optimistic note but the recovery was short-lived. Shares suffered a major setback after last week’s earnings, and traded lower during Tuesday’s session.
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