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Why Lyft Stock Lost 12% in April

By Demitri Kalogeropoulos - May 6, 2021 at 10:06AM

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Investors are worried about spiking costs.

What happened

Lyft (LYFT -1.46%) shareholders trailed a booming rally last month. Their stock dropped 12% in April compared to a 5.2% spike in the S&P 500, according to data provided by S&P Global Market Intelligence.

The decline erased only a small part of recent gains for the stock, though, which have more than doubled in the past 12 months.

A woman waiting for a ride.

Image source: Getty Images.

So what

The April swoon was powered by investor worries about the company's growth and earnings potential. Regulators might be looking to reclassify its drivers as employees rather than independent contractors, for example, which would mean extra costs and a higher administrative burden for Lyft and its competitors. Wall Street was also bracing for potentially bad news in the ride-sharing giant's fiscal first-quarter results set for early May.

Now what

That earnings announcement was better than expected, with sales growing 7% as demand started to recover following social distancing efforts from the pandemic. "We had an exceptionally strong Q1," CFO Brian Roberts told investors, "as more people started moving again." Adjusted profit margin has now improved in each of the last three quarters, while remaining in negative territory at a 12% loss in Q1.

Lyft's growth should accelerate over the next few quarters, especially as it goes up against year-ago periods dominated by retailing lockdowns across the U.S., Europe, and most other markets. But the stock's trajectory will depend on where its rider base, and profitability, settle following a volatile 2020 and 2021.

Demitri Kalogeropoulos has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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