Lyft Shares Experience Roller Coaster Ride After Earnings Error
Lyft, the popular ride-hailing company, witnessed a roller coaster ride in its stock prices after a major error was discovered in its earnings release. Initially, Lyft shares surged in extended trading, only to plummet later when the company’s Chief Financial Officer, Erin Brewer, acknowledged the mistake during an earnings call.
According to estimates from LSEG (formerly known as Refinitiv), Lyft’s performance exceeded analysts’ expectations. The company reported earnings per share of 18 cents adjusted, compared to the expected 8 cents. Additionally, Lyft’s revenue reached $1.22 billion, matching analysts’ predictions.
However, the excitement was short-lived as Brewer revealed the error in the press release. The company had misstated its margin expansion, initially indicating a growth of 500 basis points (5%) for 2024. In reality, the increase will only be 50 basis points (0.5%). Brewer clarified that this correction was necessary for the press release. The adjusted profit margin as a percentage of bookings is expected to be 2.1%, up from 1.6% in 2023.
Despite the correction, Lyft’s stock initially soared more than 60% after the earnings release hit, but later dropped significantly. The swift decline resulted in a market cap decline of over $2 billion for a company that closed the day valued at less than $5 billion.
Lyft’s revenue showed a 4% increase from the previous year, reaching $1.22 billion. The company also announced that gross bookings for the first quarter are expected to be between $3.5 billion and $3.6 billion, surpassing analysts’ estimates of $3.46 billion.
In a positive development, Lyft anticipates generating positive free cash flow for the full year for the first time. This is attributed to factors such as lower capital expenditures for 2024 compared to 2023.
Lyft has faced challenges since its initial public offering in 2019, as it struggled to cover expenses related to drivers and compete with its larger rival, Uber. Despite the recent surge in stock prices, Lyft’s shares are still more than 80% below their debut price.
CEO David Risher, who assumed the position in March of the previous year, highlighted the company’s achievement of reaching a record number of annual riders. The number of rides increased by 26% from the previous year, totaling 191 million rides in the fourth quarter. Additionally, active riders rose by 10% to 22.4 million.
For the entire year, Lyft’s gross bookings increased by 14% to $13.8 billion, while bookings for the quarter rose by 17% to $3.7 billion.
Prior to the earnings report, Lyft shares had experienced a 19% decline at the start of 2024, while Uber shares had risen by 12%.
As Lyft continues to navigate the challenges of the ride-hailing industry, investors and analysts will closely monitor its financial performance and strategic decisions. The company’s ability to generate positive free cash flow and sustain growth will be crucial in determining its future success.