San Francisco-headquartered Lyft (LYFT) provides a ride-sharing platform in the U.S. and Canada. I am bullish on the stock.
Prior to the onset of COVID-19 in the U.S., Lyft was making a name for itself as one of the nation’s best-known taxi alternatives. The ride-sharing boom was in progress, and it seemed that nothing could stop Lyft from growing exponentially as a business enterprise.
The COVID-19 pandemic changed everything, though, as people weren’t as willing to venture outside their homes for a while. This put a damper on Lyft’s business, and as the pandemic continues to linger through new variant strains, the burden is on Lyft to demonstrate its viability.
That’s easier said than done, of course, but Lyft had an opportunity to tout its achievements in a recently issued fiscal report. As we’ll see, investors’ responses to Lyft’s results were immediate and startling – and just maybe, a little bit irrational.
Lyft Stock Gets Dropped
Even before Lyft reported the company’s first-quarter 2022 financial results, LYFT stock was in a persistent state of decline. The share price topped out at around $63 in the summer of 2021, and it’s been all downhill ever since.
As LYFT stock hovers around the key $20 level, investors must ask themselves whether the stock is a falling knife to be avoided at all costs or the bargain of a lifetime. Either way, investing in Lyft now involves high risk, so please try not to over-leverage yourself.
It was a major headline grabber when traders pushed LYFT stock from $30 to the $20 area on May 4. Judging from this startling price move, you might be tempted to assume that Lyft’s Q1 2022 financial report will be replete with negative data points. Interestingly, however, the company’s results weren’t all that bad and even featured some positive results.
Sometimes, Wall Street can be unforgiving. Investors should consider that, during 2022’s first quarter, the omicron COVID-19 variant strain was putting negative pressure on the ride-sharing market. In a conference call, Lyft CFO Elaine Paul stated that due to omicron’s impact on demand in January, the company “anticipated that ride volumes would be down slightly in Q1 versus Q4.”
However, demand “rebounded meaningfully in February and March,” and Lyft’s total first-quarter 2022 ride-share ride count actually increased quarter-over-quarter and reached a new COVID-19 high.
So, perhaps the investing community was too harsh on LYFT stock. What else did Lyft’s quarterly results reveal, though?
Better Than Expected
Lyft co-founder and CEO Logan Green stated that “Q1 was better than we expected,” but informed investors must still analyze the data and determine whether it’s bullish or bearish.
Looking at Lyft’s top line, it’s impossible to deny that the company knocked it out of the park. Specifically, Lyft’s first-quarter 2022 revenue of $875.6 million represented a highly impressive 44% year-over-year improvement.
The company’s bottom-line result was either positive or negative, depending on how you choose to view it. For Q1 2022, Lyft’s net earnings loss was $196.9 million. It’s possible that investors were hoping for a net earnings gain rather than a loss and consequently dumped their LYFT stock shares.
Let’s not jump to any hasty conclusions, though. Lyft’s net loss of $196.9 million represented a vast improvement over the company’s $427.3 million net loss from the year-earlier quarter and is also better than its net loss of $283.2 million from the fourth quarter of 2021.
In other words, Lyft’s net earnings loss narrowed, and that’s a good sign for investors who are willing to see the glass as half-full rather than half-empty. Furthermore, there’s more than one way to measure Lyft’s bottom-line results. Notably, the company’s adjusted EBITDA for Q1 2022 was $54.8 million, and this figure shows a $127.8 million improvement compared to the 2021’s first quarter.
On top of all that, Lyft proved that the company is in a solid capital position. At the end of 2022’s first quarter, Lyft reported having $2.2 billion of unrestricted cash, cash equivalents, and short-term investments. It’s baffling that investors seemingly ignored this fact and slammed LYFT stock, even though the company is well-capitalized.
Additionally, it appears that some investors might have missed something interesting that Paul said. In particular, the CFO stated that Lyft expects “to strategically invest in key business initiatives to support our continued growth.” What these “key business initiatives” will be, remains to be seen. Still, it’s exciting to speculate on how Lyft will expand its business model in the coming quarters.
Wall Street’s Take
Turning to Wall Street, LYFT is a Moderate Buy based on 18 Buys and nine Hold ratings assigned in the past three months. The average Lyft price target is $45.20, implying 120.2% upside potential.
The Takeaway
It’s possible that investors were too harsh on LYFT stock post-earnings, and there may be a terrific bargain here for value-focused traders. Could the stock get back to its $60+ peak someday?
Anything is possible, and Lyft’s financial results had enough positive points to justify a long position now. So, don’t hesitate to analyze the company’s financial data and potentially start accumulating LYFT stock shares in anticipation of a powerful comeback.
Discover new investment ideas with data you can trust.
Read full Disclaimer & Disclosure
