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Lyft Crushed Earnings, but Investors Were Disappointed. Here's Why.

By Jeremy Bowman - Updated Feb 12, 2020 at 11:57AM

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The ridesharing specialist beat estimates again, but the goalposts keep moving.

Lyft (LYFT -6.77%) did it again. The #2 ridesharing opeartor just blew past its own guidance and analyst estimates in its fourth-quarter earnings report.

Lyft has made a habit of beating guidance, but investors still seem skeptical. Despite the strong results, the stock was down 5.7% after hours. Before digging into the report further, let's take a look at the big numbers.

  • Revenue in the quarter jumped 52% to $1.02 billion. That beat the company's own guidance of $975-$985 million, and analyst estimates at $984.2 million. Growth came from both active riders, which rose 23% to 22.9 million, and revenue per active rider, which also rose 23% to $44.40.
  • On the bottom line, Adjusted EBITDA loss narrowed from $251.1 million to $130.7 million, ahead of Lyft's estimate of a loss of $160 million-$170 million. Lyft's adjusted loss per share was $0.41, well ahead of the analyst consensus at $1.39. The company slashed marketing expenses by 14.4% to $186.9 million, which helped lift profitability. 

For the current quarter, Lyft sees revenue rising 36%-37% to $1.055 billion-$1.06 billion. Management said the company would nevertheless have a difficult comparison against last year, when it got a boost from buzz around the IPO, which sparked interest in the brand. For the full year, the company sees revenue growth continuing to slow to 27%-29%, and revenue hitting $4.575-$4.65 billion. That guidance was similar to analyst expectations, but investors may have been disappointed that the outlook wasn't higher given the strong fourth-quarter performance.  

Just a few days after Uber pulled its own profitability guidance forward to the end of 2020, Lyft declined to do the same. For 2020, the company estimates an Adjusted EBITDA loss of $450-$490 million, but that's still better than its 2019 result at $678.9 million. Management continues to anticipate Adjusted EBITDA profitability by the end of 2021. 

Lyft fielded several questions during the earnings call about comparisons to Uber (UBER -5.34%), meaning Wall Street may have been disappointed that it didn't also accelerate its profitability goal to the end of 2020. Lyft shares also gained in the wake of Uber's report last week, so the after-hours loss can be seen as the stock giving back those recent gains.

Two women in the front of a Lyft car.

Image source: Lyft.

Looking ahead to 2020

On the earnings call, management also outlined some key initiatives it's counting on for 2020. First, the company recently partnered with JPMorgan Chase to give cardholders benefits when they use their Chase cards to pay for Lyft rides. Sapphire Reserve and JPMorgan Reserve cardholders will get 10 times the total points on their spending and a free 1-year membership for Lyft Pink, Lyft's rewards program that launched in December. Other Chase cardholders will get 5% cash back on Lyft rides. President John Zimmer called the partnership an "outsized opportunity" for the company and said the initial response was "extremely positive."

Management also noted that the company has under-indexed on corporate clients compared to Uber, and that it sees such partnerships as an important growth driver and a way to continue to lift revenue per active rider. In addition to the Chase partnership, Lyft also touted partnership with companies like DisneyHilton, and Delta, and investors should expect the ride-hailing company to forge more corporate partnerships in 2020.

Finally, Lyft also made changes in its micromobility segment, pulling out of six scooter markets in order to focus on its nine highest-density markets, where it rolled out a new scooter model with more durability and lower operating costs. It also relaunched e-bikes, which it said have generated significantly more rides per day then traditional bikes. Management believes that e-bikes will improve unit economics and fleet availability over time.

CEO Logan Green emphasized the company's focus on profitable growth, product innovation, and operating leverage as it heads into 2020. However, the company has a tight needle to thread in order to drive the stock's recovery further. With revenue growth slowing, losses still mounting, and competition from Uber looming, it won't be easy.

Jeremy Bowman owns shares of Walt Disney. The Motley Fool owns shares of and recommends Delta Air Lines and Walt Disney. The Motley Fool recommends Uber Technologies and recommends the following options: long January 2021 $60 calls on Walt Disney and short April 2020 $135 calls on Walt Disney. The Motley Fool has a disclosure policy.

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Stocks Mentioned

The Walt Disney Company Stock Quote
The Walt Disney Company
$123.06 (-1.52%) $-1.90
Delta Air Lines, Inc. Stock Quote
Delta Air Lines, Inc.
$34.37 (-2.74%) $0.97
JPMorgan Chase & Co. Stock Quote
JPMorgan Chase & Co.
$122.20 (-1.16%) $-1.43
Hilton Worldwide Holdings Inc. Stock Quote
Hilton Worldwide Holdings Inc.
$137.36 (-1.19%) $-1.66
Uber Technologies, Inc. Stock Quote
Uber Technologies, Inc.
$30.65 (-5.34%) $-1.73
Lyft, Inc. Stock Quote
Lyft, Inc.
$18.03 (-6.77%) $-1.31

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