What Happened?
Shares of ride sharing service Lyft (NASDAQ: LYFT) jumped 30.2% in the morning session after the company reported robust third-quarter earnings, significantly surpassing analysts' expectations for both revenue and EBITDA.
On the growth front, Lyft saw a 9% increase in active riders and a 6% increase in ride frequency, fueled by growth in Canada, heightened demand during the back-to-school season, and the introduction of new products like Price Lock.
Moving on to the bottom line, Lyft reduced its per-ride incentive expenses by 17% year-over-year, achieving efficiency well ahead of its annual multiyear target of 10%. Profitability ratios were also supported by reductions in insurance costs.
Looking ahead, Lyft plans to expand its business in Canada, drive engagement via partnerships with DoorDash and autonomous vehicle companies, and grow Lyft Media (advertising business) to enhance revenue. Overall, we think this was an impressive quarter.
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What The Market Is Telling Us
Lyft’s shares are extremely volatile and have had 34 moves greater than 5% over the last year. But moves this big are rare even for Lyft and indicate this news significantly impacted the market’s perception of the business.
The previous big move we wrote about was 27 days ago when the stock gained 10.6% after Tesla announced plans for the launch of its Robotaxi service as early as 2025 in a move that could alter the ride-hailing market for better or worse.
Lyft's stock reaction suggests that the market sees some potential for the company to benefit. Some Wall Street analysts weighed in on the development, with Jefferies' John Colantuoni adding, "We consider the event a best-case outcome for Uber (Lyft's competitor)."
Lyft is up 27.4% since the beginning of the year, but at $17.59 per share, it is still trading 13.3% 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 $406.21.
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