Please ensure Javascript is enabled for purposes of website accessibility

Why Lyft Soared 22% in April

By Andrew Tseng - May 5, 2020 at 8:57AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Has ride-hailing bottomed out yet?

What happened

Shares of Lyft (LYFT -2.22%) soared 22.3% during April, according to data from S&P Global Market Intelligence. That was enough to send the stock from about $27 per share to $33 per share.

April's strong stock gain comes on the heels of a dreadful March when Lyft shares tanked 29.6% from $38 per share to $27 per share due to the panic over COVID-19.

So what

The company has been fairly quiet about how its business has been faring lately, but it's been widely reported that the ridesharing business -- whether Lyft or Uber Technologies -- is doing dreadfully right now. Tech industry website The Information reported Lyft's ride-hailing business was down 80% year over year at one point but had improved to being down 75%.

A young woman in a city carrying shopping bags hailing a car.

Image source: Getty Images.

On April 21, Lyft announced it would be reporting its first-quarter earnings results on Wednesday, May 6. In addition, management wrote the following regarding its business:

The pandemic began to have a negative impact on business trends, including ride volumes, in mid-March, which has continued into April. On May 6, Lyft will provide an update on current business trends and the Company's response to COVID-19. This update will include detailed actions the Company is taking to strengthen its financial position, improve its cost structure, and support drivers and riders on the Lyft platform. In light of the evolving and unpredictable effects of COVID-19, Lyft is currently not in a position to forecast the expected impact of COVID-19 on its financial and operating results for the remainder of 2020. As a result, Lyft is withdrawing the annual revenue and adjusted EBITDA guidance it provided on February 11, 2020 for the fiscal year ending December 31, 2020.

With far fewer people needing rides for commuting, travel, and entertainment these days, it's not surprising that Lyft's business isn't doing well. 

Now what

The key question for Lyft investors is how much cash the company will burn while its business is suffering, and how long it could be before the business picks up in a material way.

Given the company had almost $2.9 billion of cash and investments as of the end of last year and no debt, and a highly variable cost structure, it seems likely the company will be able to survive and thrive over time

Andrew Tseng owns shares of Lyft. The Motley Fool recommends Uber Technologies. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Lyft, Inc. Stock Quote
Lyft, Inc.
$19.83 (-2.22%) $0.45
Uber Technologies, Inc. Stock Quote
Uber Technologies, Inc.
$31.85 (-0.50%) $0.16

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/09/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.