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LYFT busts above key resistance following beat and raise quarter

AInvestThursday, Nov 7, 2024 7:15 am ET
2min read

Lyft's Q3 results surpassed expectations, with revenue rising 31.5% year-over-year to $1.52 billion, exceeding the estimated $1.44 billion. Gross bookings came in at $4.11 billion, slightly above the expected $4.08 billion. Lyft's active riders reached 24.4 million, closely aligning with estimates, and the company recorded 216.7 million rides, beating the anticipated 213.15 million. Adjusted EBITDA reached $107.3 million, significantly higher than the forecasted $93.9 million, while adjusted net income hit $118.1 million, well above the $83.2 million estimate. Lyft’s loss per share was $3.00, narrower than the expected loss of $3.10, reflecting an improvement in profitability metrics.

Key metrics highlight Lyft's robust performance and improving operational efficiency. Active riders grew by 9% year-over-year, while total rides increased by 16%, both achieving record highs. The company’s take rate rose to 37.1%, a 4.5-point year-over-year improvement, contributing to revenue growth. Cash and cash equivalents stood at $770.3 million, well above the expected $636.2 million, while free cash flow reached $242.8 million. These results underscore Lyft’s success in growing gross bookings volume (GBV) and enhancing its financial resilience, positioning the company for a strong finish to the year.

Looking ahead, Lyft offered optimistic Q4 guidance. The company projects gross bookings between $4.28 billion and $4.35 billion, ahead of the $4.23 billion consensus, and anticipates adjusted EBITDA in the range of $100 million to $105 million, surpassing the estimated $85.1 million. Lyft expects its adjusted EBITDA margin as a percentage of gross bookings to reach 2.3%-2.4%, slightly above the Street’s forecast of 2.01%. For the full fiscal year, Lyft aims for a 2.3% adjusted EBITDA margin, an improvement over prior guidance, reinforcing its ability to drive profitable growth.

One of the notable aspects of Lyft's growth strategy includes diversifying its services and expanding in Canada, where Toronto is now the company's sixth-largest market. Lyft has also introduced features like Price Lock to appeal to commuters, driving further engagement and customer loyalty. This approach has resulted in a stronger user base and additional leverage within its business model, which should continue supporting both top-line growth and margin improvement.

Lyft also faces a competitive landscape, particularly with its largest rival, Uber. While Lyft remains a pure play in mobility, it lacks Uber’s diversified revenue stream from delivery. However, Lyft’s recent partnership with DoorDash could bridge this gap by offering delivery access to its user base without significant additional costs. This collaboration could attract new, high-frequency users, particularly those who do not hold a subscription to Uber One, potentially enhancing customer acquisition and retention.

Despite Lyft’s progress, challenges remain, especially in achieving scale comparable to Uber and forming partnerships in autonomous vehicle (AV) development. Uber’s mobility segment is five times larger, and Lyft has historically lagged in AV partnerships and customer engagement. Nonetheless, Lyft's moves to address these gaps signal a commitment to catching up, particularly in light of growing market demand for AV integration and more comprehensive service options.

Following the earnings release, Lyft’s stock surged by 20%, reflecting investor confidence in the company’s turnaround and strategic initiatives. Lyft’s adjusted EBITDA guidance and robust free cash flow projections of at least $650 million for 2024 have bolstered investor sentiment. This positive price movement indicates a favorable market response to Lyft’s strengthened outlook, backed by a break above its 200-day moving average, which is often seen as a bullish technical indicator.

Given Lyft’s improved performance, favorable guidance, and stock momentum, it may be an opportune time for investors to consider building a position. While competition with Uber and the scalability gap remain concerns, Lyft’s strategic initiatives and progress with partners like DoorDash create potential for sustained growth. With a positive technical setup and an improving financial profile, Lyft’s stock appears well-positioned for those seeking exposure to the mobility sector’s recovery trajectory.

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