You know you're having a bad rookie year when your stock tumbles 18.3% in your sixth week of trading, as Lyft (LYFT 3.59%) just did, and it's not the biggest slide investors have had to put up with in your brief publicly traded tenure. Shares of the country's second-largest ridesharing service plummeted 19.5% in its second full week of trading.
This could've been a great week for Lyft. It was reporting earnings. Larger rival Uber (UBER -0.32%) was finally going public. Momentum was starting to turn the corner, with the shares closing higher a week earlier. The catalysts were lined up, but then things went horribly wrong.
Let's go over the play-by-play of Lyft's second worst week as a public company.
Image source: Lyft.
1. Earnings failed to impress
Lyft's first financial report as a public company was the first of the week's two major events that would move the stock, and it wasn't necessarily a bad quarterly outing. Revenue nearly doubled, rising 95% to hit $776 million. Analysts were settling for an 86% advance on the top line. Lyft's adjusted loss, while massive, also clocked in ahead of expectations.
There are now 20.5 million active riders on the platform, a healthy 46% year-over-year increase and a respectable 10% bump from where things were when the year began. Average revenue per rider, Lyft's take rate, and contribution margin all moved nicely higher.
A few Wall Street pros responded favorably to the report. Analysts at J.P. Morgan, Canaccord, and Jefferies raised their price targets after the results were announced. However, Lyft's guidance calls for top-line growth to slow to between 59% and 60% in the current quarter, as well as 52% to 53% growth for all of 2019. The market was braced for deceleration, but the bears still got the better of the bulls. Lyft's earnings after Tuesday's market close helped tee off a nearly 11% drop in the stock on Wednesday.
2. Uber shifts into reverse
Friday's debut of the Uber IPO could have also come to save the day, but it was another clunker. Investors bidding up the top dog in this niche would have lifted Lyft on its coattails, but Uber also followed its smaller rival in stumbling out of the gate.
Uber went public at $45, already below where it was looking to hit the market, and the shares still buckled. It closed 7.6% lower on Friday, a rude awakening for the company generating nearly five times the revenue of Lyft, with a much larger global footprint. Lyft stock followed suit, hitting yet another all-time low on Friday.
3. China crashed the market party
Poorly received earnings and a rough start for the niche bellwether are bad enough, but it also didn't help that investors were bailing on stocks in general. A growing rift between China and the U.S. in trade tariff talks gnawed away at market sentiment.
The S&P 500 slumped 2.2% for the week, sliding in each of the first four trading days, before staging a slight recovery on Friday. Lyft doesn't necessarily play along with the market, as the stock has taken big hits even during market rallies. However, nervous investors who are shifting into defensive positions aren't going to warm up to buying shares of a distant second-place competitor in an industry where even the market leader is losing a ton of money.
This isn't the end for Lyft. It can continue to exceed Wall Street growth expectations, Uber can bounce back, and we know it's just a matter of time before the market averages in general close higher. A perfect storm for Lyft was enough for a very imperfect week for its shareholders.
