Lyft (NASDAQ:LYFT) Misses Q3 Sales Targets, Stock Drops

Radek Strnad /
2022/11/07 4:13 pm EST

Ride sharing service Lyft (NASDAQ: LYFT) missed analyst expectations in Q3 FY2022 quarter, with revenue up 21.9% year on year to $1.05 billion. Guidance for the next quarter also missed slightly analyst expectations with revenues guided to $1.15 billion at the midpoint, or 0.43% below analyst estimates. Lyft made a GAAP loss of $422.2 million, down on its loss of $71.5 million, in the same quarter last year.

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Lyft (LYFT) Q3 FY2022 Highlights:

  • Revenue: $1.05 billion vs analyst estimates of $1.06 billion (0.77% miss)
  • EPS: -$1.18 vs analyst estimates of -$0.50 (-$0.68 miss)
  • Revenue guidance for Q4 2022 is $1.15 billion at the midpoint, below analyst estimates of $1.16 billion
  • Free cash flow was negative $55.2 million, compared to negative free cash flow of $48.1 million in previous quarter
  • Gross Margin (GAAP): 45.8%, up from 45.2% same quarter last year
  • Active Riders: 20.3 million, up 1.37 million year on year

“I’m extremely proud of the strong results the team delivered in Q3. We are seeing material progress and organic tailwinds and feel very well positioned for the road ahead,” said Logan Green, co-founder and chief executive officer of Lyft.

Founded by Logan Green and John Zimmer as a long-distance intercity carpooling company Zimride, Lyft (NASDAQ: LYFT) operates a ridesharing network in the US and Canada.

The iPhone changed the world, ushering in the era of the “always-on” internet and “on-demand” services - anything someone could want is just a few taps away. Likewise, the gig economy sprang up in a similar fashion, with a proliferation of tech-enabled freelance labor marketplaces, which work hand and hand with many on demand services. Individuals can now work on demand too. What began with tech enabled platforms that aggregated riders and drivers has expanded over the past decade to include food delivery, groceries, and now even a plumber or graphic designer are all just a few taps away.

Sales Growth

Lyft's revenue growth over the last three years has been strong, averaging 20.8% annually.

Lyft Total Revenue

This quarter, Lyft reported a decent 21.9% year on year revenue growth, but this result fell short of what analysts were expecting.

Guidance for the next quarter indicates Lyft is expecting revenue to grow 19% year on year to $1.15 billion, slowing down from the 70.1% year-over-year increase in revenue the company had recorded in the same quarter last year. Ahead of the earnings results the analysts covering the company were estimating sales to grow 23.4% over the next twelve months.

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Usage Growth

As a gig economy marketplace, Lyft generates revenue growth by a combination of the volume of services users order and how much commission it earns.

Over the last two years the number of Lyft's paying users, a key usage metric for the company, grew 21.4% annually to 20.3 million users. This is a strong growth for a consumer internet company.

Lyft Active Riders

In Q3 the company added 1.37 million paying users, translating to a 7.23% growth year on year.

Key Takeaways from Lyft's Q3 Results

Since it has still been burning cash over the last twelve months it is worth keeping an eye on Lyft’s balance sheet, but we note that with a market capitalization of $4.84 billion and more than $1.78 billion in cash, the company has the capacity to continue to prioritise growth over profitability.

We struggled to find many strong positives in these results. On the other hand, it was unfortunate to see that Lyft missed analysts' revenue expectations. Overall, this quarter's results were not the best we've seen from Lyft. The company is down 8.26% on the results and currently trades at $12.98 per share.

Lyft may have had a tough quarter, but does that actually create an opportunity to invest right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

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The author has no position in any of the stocks mentioned.