What Happened:
Shares of ride sharing service Lyft (NASDAQ: LYFT) fell 16.2% in the morning session after the company reported second quarter earnings results. Q3 guidance was below expectations for both gross bookings and adjusted EBITDA, which is weighing on the stock. On the other hand, its revenue and adjusted EBITDA both outperformed Wall Street's estimates. Overall, it was a mixed but weaker quarter for the company.
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What is the market telling us:
Lyft's shares are very volatile and over the last year have had 40 moves greater than 5%. But moves this big are very rare even for Lyft and that is indicating to us that this news had a significant impact on the market's perception of the business.
The biggest move we wrote about over the last year was 6 months ago, when the stock gained 37.7% on the news that the company reported fourth-quarter results indicating growing users, enabling it to beat Wall Street's revenue and EPS estimates. Rides growth accelerated for the fourth quarter in a row to 26% year on year in the quarter. Guidance for Q1 2024 came in ahead of expectations for gross bookings (from which the company generates revenue by taking a cut) and adjusted EBITDA, showing that both near-term growth and profits are better than expected.
Lastly, the company projected positive free cash flow for the full year 2024, converting roughly half its forecasted full-year EBITDA into cash. This is a nice milestone. Interestingly, the initial company release had a typo. Instead of guiding to a 50 basis point (0.5 percentage points) increase in 2024 adjusted EBITDA, the text stated 500 basis points (5 percentage points). This caused the stock to spike up 65% in after-hours trading before settling down. Holding aside the stock move caused by the typo, it was still a very good quarter, and the stock is currently reflecting this.
Lyft is down 31% since the beginning of the year, and at $9.50 per share it is trading 53.2% below its 52-week high of $20.28 from March 2024. Investors who bought $1,000 worth of Lyft's shares 5 years ago would now be looking at an investment worth $157.83.
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