Lyft’s Shares Tumbled. Solid earnings aren’t enough.

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Lyft (LYFT) stocks tanked during yesterday’s trading session. It had its worst day since April although it posted a 125% increase in revenue in Q2.

Lyft closed at $49.57 today, compared to the $55.34 closing price the previous day. It was down more than 10%. Why? Didn’t they just post good earnings days before?

One of the reasons might be what Lyft’s CFO Brian Roberts said in the earnings call, “Not over yet, especially with emerging variants and new restrictions in certain markets, hinting at a possible growth that will not meet expectations.

However, the main reason for such a bearish move is the rising costs, which overshadow solid performance and recovery.

Investors were worried about rising investments into driver incentives and that it may continue into next year, as their CFO said that they may spend 30-40 million in the third quarter to attract drivers back to their platform and retain them.

Analysts’ Outlook

Brad Erickson of RBC Capital Markets rated Lyft as “outperform” where he thinks this situation is just transitory and encourages investors to adopt a longer-term view where the EBITDA could be significantly better.

Another “outperform” rating was given by Mark Mahaney of Evercore ISI despite believing that adversity remains as the level of services such as ride pricing, wait times, and availability of rides are not the best yet.

Mark Shmulik from Bernstein holds a “market perform” rating on Lyft. He was concerned with the signs of diminishing user growth. It was also mentioned that the future earnings outlook may be highly dependent on pricing power and engagement growth.

An important key to take into account is that, although the Q2 revenue was more than doubled Y-O-Y, the revenue was compared with the time when covid was at its peak. Looking at the figures, this year’s Q2 revenue came in at $765 million while it was $867.3 million 2 years ago during the same period.

Current Technical View

From a technical standpoint, the price broke through the 200 days SMA aggressively and is currently trading below both the 50 SMA and 200 SMA.. Price may test the support zone of $44 in the coming days. Will the bulls come in and bid the shares higher, or will the bears hold on to their momentum?

Let us know what you think in the comments below.


Ru Yi 

Financial Market Analyst

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