What happened
Lyft (LYFT -1.80%) posted an unexpected loss in the fourth quarter and provided disappointing guidance for the first three months of 2023. Investors didn't see much reason for optimism, sending Lyft shares down about 35% on Friday morning.
So what
Lyft lost $0.74 per share in the last three months of 2022, a significant miss in a quarter for which analysts had expected a slight profit. For the year, Lyft's net loss widened to $588.1 million, or $1.61 per share, from $283.2 million, or $0.83 per share, in 2021.
The miss was caused in part by higher insurance reserves, with $225 million in added dollars reflected in cost of revenue and another $150 million in general and administrative expenses.
But there appears to be softness relative to expectations on the demand side as well. Lyft forecast sales of $975 million for the current quarter, which would be up 11% year over year but is short of the $1.09 billion consensus estimate.
The news wasn't all bad for Lyft. The company reported 20.4 million riders in the quarter, its highest total in nearly three years. And revenue of $1.18 billion was up 21% year over year and ahead of estimates.
"In Q4 we achieved the highest revenues in our company's history and we outperformed guidance on Adjusted EBITDA excluding the action we took to strengthen our insurance reserves," Chief Financial Officer Elaine Paul said in a statement. "Our Q1 guidance is the result of seasonality and lower prices, including less Prime Time. Additionally, our different insurance renewal timing puts differently timed pressure on our [profit and loss statement]."
Now what
The results come just days after Lyft archrival Uber Technologies reported better-than-expected revenue and earnings growth, and Wall Street appears worried that the issues at Lyft are deeper than one quarter's results. The company was the subject of about a half dozen downgrades and a number of price target cuts after results were announced.
Wedbush analyst Daniel Ives, who moved Lyft to a neutral from an outperform post-earnings, called the earnings release and conference call a "debacle for the ages." He said that Lyft's business model "faces an Everest-like uphill climb" to profitability, which is in "stark contrast to big brother" Uber.
Lyft still has a sizable business and is a formidable No. 2 behind Uber. But this earnings season led to more questions than answers for the ride-share company. Investors are in no mood to stick around to find the answers.
