Lyft (LYFT) Stock Trades Up, Here Is Why

Radek Strnad /
2024/06/06 11:09 am EDT

What Happened:

Shares of ride sharing service Lyft (NASDAQ: LYFT) jumped 9.3% in the morning session after the company provided promising financial updates during its 2024 Investor Day session. 1.) Gross Bookings is expected to compound at an annual growth rate of approximately 15% between FY'2024 and FY'2027. 2.) Adjusted EBITDA margin (measured as a percentage of Gross Bookings) was pegged at approximately 4% on a full-year basis in 2027 3.) Free cash flow conversion (measured as a percentage of Adjusted EBITDA) is expected to exceed 90% annually between 2025 and 2027. The projections highlighted a focus on achieving a healthy balance between growth and profitability, which the market is likely to cheer. 

The announcement came on the heels of strong Q1'24 earnings results, as revenue blew past analysts' expectations, and gross bookings and the number of rides conducted outperformed. In addition, the company reaffirmed its Q2 2024 and full-year 2024 guidance provided during the Q1'24 earnings call. After the initial pop the shares cooled down to $16.24, up 4.4% from previous close.

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What is the market telling us:

Lyft's shares are very volatile and over the last year have had 46 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business. 

The previous big move we wrote about was 29 days ago, when the stock gained 9.4% on the news that the company reported first quarter results that blew past analysts' revenue expectations as its gross bookings and number of rides conducted outperformed. Its EPS and free cash flow topped Wall Street's estimates -- this was the second consecutive quarter of positive free cash flow, which is encouraging given its unprofitable history. Zooming out, we think this was an impressive quarter that should delight shareholders.

Lyft is up 17.6% since the beginning of the year, but at $16.24 per share it is still trading 19.9% 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 $263.43.

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