What Happened:
Shares of ride sharing service Lyft (NASDAQ: LYFT) jumped 37.7% in the morning session after 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 expects to generate 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.
Is now the time to buy Lyft? Access our full analysis report here, it's free.
What is the market telling us:
Lyft's shares are very volatile and over the last year have had 48 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 10 months ago, when the stock dropped 15.5% on the news that the company reported revenue and earnings per share (EPS) in the first quarter that came in ahead of analysts' estimates. Active riders was in-line while revenue per rider beat slightly. However the company still faced cash burn issues. In addition, revenue and adjusted EBITDA guidance for the next quarter missed analysts' expectations. This meant the debate continued on long-term growth and margin levels. Overall, the results were poor, especially in light of Uber's strong earnings earlier in the week.
Lyft is up 14.6% since the beginning of the year. Investors who bought $1,000 worth of Lyft's shares at the IPO in March 2019 would now be looking at an investment worth $202.08.
When a company has more cash than it knows what to do with, buying back its own shares can make a lot of sense–as long as the price is right. Luckily, we’ve found one, a low-priced stock that is gushing free cash flow AND buying back shares. Click here to claim your Special Free Report on a fallen angel growth story that is already recovering from a setback.