Lyft's (LYFT +0.99%) stock plunged 19% on May 5 after the transportation services provider posted its first-quarter report. Its revenue rose 14% year over year to $1 billion and beat analysts' estimates by $18 million.
The company narrowed its net loss from $197 million to $188 million, or $0.50 per share, which still beat the consensus forecast by $0.04 per share. Its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) declined 59% to $23 million.
Lyft cleared Wall Street's low bar, but its weak growth in active riders and soft guidance for the second quarter sank its stock. Should investors bet on a turnaround for Lyft, which now trades nearly 90% below its IPO price, in the next 12 months?
Image source: Getty Images.
What happened to Lyft?
Lyft differs from its larger rival Uber (UBER +8.53%) in several ways. Lyft only operates in the U.S. and Canada, while Uber's reach extends to more overseas markets. Uber has its own dedicated food delivery platform, Uber Eats, while Lyft only delivers food through a partnership with Just Eat Takeaway's Grubhub. Both companies also provide bike, scooter, and car rentals.
Between 2017 and 2023, Lyft's share of the U.S. ride-hailing market dropped from 38% to 26%, according to YipitData. Uber expanded its domestic share from 62% to 74% and continued to grow overseas.
Uber's market share gains, superior scale, and geographic diversification have all enabled it to generate more stable growth in revenue and adjusted EBITDA than Lyft over the past year. Uber has also been led by CEO Dara Khosrowshahi since 2017, but Lyft recently brought in a new CEO -- David Risher -- to turn around its struggling business.
NASDAQ: LYFT
Key Data Points
Another quarter of sluggish growth
Lyft's number of active riders rose 10% year over year to 19.6 million in Q1, but that marked a sequential decline from its 20.4 million riders in the fourth quarter and missed analysts' expectations for 19.8 million riders. Its revenue per active rider increased 4% year over year to $51.17, but that also marked a sequential drop of 11%.
|
Metric |
Q1 2022 |
Q2 2022 |
Q3 2022 |
Q4 2022 |
Q1 2023 |
|---|---|---|---|---|---|
|
Active riders (millions) |
17.8 |
19.9 |
20.3 |
20.4 |
19.6 |
|
Growth (YOY) |
32% |
16% |
7% |
9% |
10% |
|
Revenue per active rider |
$49.18 |
$49.89 |
$51.88 |
$57.72 |
$51.17 |
|
Growth (YOY) |
9% |
12% |
14% |
11% |
4% |
Data source: Lyft. YOY = year over year.
In contrast, Uber's comparable number of monthly active platform consumers (MAPCs) rose 13% year over year to 130 million in the first quarter and accelerated from its 11% growth in Q4.
Lyft's sequential loss of riders was largely caused by its driver shortages over the past year, which caused its "Prime Time" surge pricing to kick in. Those elevated prices, which persisted into the first quarter, likely drove some of its passengers toward Uber. Lyft is trying to offset that pressure by lowering its base prices, but that strategy has merely been reducing its revenue per rider while failing to boost its total number of active riders.
Uber resolved its post-pandemic driver shortages last year, which enabled it to capitalize on Lyft's ongoing problems. In addition, Uber's take rates (the percentage of bookings it retains as revenue) also consistently rose across both its mobility and delivery businesses over the past year, even as it dialed back its incentives for its drivers and customers.
Lyft doesn't disclose its take rates on a regular basis, but its sequential decline in revenue per active rider suggests that ratio is falling. Lyft expects its revenue to only rise 1%-3% year over year in Q2, which broadly misses analysts' expectations for 9% growth.
Cutting costs to stabilize its margins
As Lyft's growth cooled off, it has struggled to turn a profit. It posted a negative adjusted EBITDA of $157.5 million in 2021, and that loss widened to $416.5 million in 2022. Uber generated a positive adjusted EBITDA of $1.71 billion in 2022.
On the bright side, Lyft's return to adjusted EBITDA profitability in the first quarter -- which followed a steep loss of $248 million in Q4 -- marks a solid step in the right direction. CEO David Risher, who took the helm in April, intends to lay off about 26% of its workforce to stabilize its adjusted EBITDA margins.
For the second quarter, Lyft expects its adjusted EBITDA to remain stable sequentially at $20 million to $30 million. That would give it an adjusted EBITDA margin of 2%-3%, compared to 2.3% in Q1. Unfortunately, those estimates are still anemic compared to Uber's adjusted EBITDA margin of 8.6% in its first quarter.
Where will Lyft's stock be in a year?
During the conference call, Risher said he was "very aware" that Lyft's "current levels of growth and profitability are not acceptable." That dire warning suggests that Lyft still can't be considered a bargain at less than 1 times this year's sales. Lyft's downside potential might be limited by its valuation over the next 12 months, but I fully expect its stock to underperform Uber -- as well as the broader market -- until it gets its act together.
