Analysts reveal new Lyft stock price targets after earnings report

Published 4:08 pm Wednesday, February 14, 2024

By Rob Lenihan

: Analysts are reacting to Lyft's earnings report.

You may think zero is nothing, but just try putting one in the wrong place.

The people at Lyft (LYFT) learned this valuable lesson when they reported their fourth-quarter results on Feb. 13.

It seems that the ride-sharing company picked up an unwanted passenger — in the form of an extra goose egg in the financials.

In its statement, Lyft estimated its gross margin would expand by 500 basis points, or 5.0 percentage points.

The actual estimate is a bit lower: 50 basis points or 0.5 percentage points.

Chief Financial Officer Erin Brewer set the record straight during the company’s earnings call, telling analysts that “this is actually a correction for the press release.”

Lyft, which beat Wall Street’s fourth-quarter earnings expectations, saw its shares initially take off, then fall after the revised figure.

They were nonetheless surging 31% to $15.83 at the last check.

Analysts are reacting to Lyft’s earnings report.

Lyft CEO: free cash flow ‘huge milestone’

“More than 1 million drivers collectively earned over $8 billion using Lyft,” Chief Executive David Risher told analysts, according to a transcript of the call. “We also had the highest annual ridership in our company’s history, and ride-frequency growth was the strongest it’s been since 2018 prior to our IPO.”

The company earned 19 cents a share, more than twice the FactSet consensus estimate of 8 cents a share. Revenue of $1.23 billion beat analysts’ $1.22 billion target.

A year earlier, the company posted a loss of 76 cents a share on $1.18 billion in revenue.

Lyft also said that it expected to generate positive free cash flow for the first time for the full year. Roughly half of adjusted EBITDA will be converted to leftover cash for the full year of 2024.

The more free cash flow a company has, the more it can use for things like dividends, debt repayment, and growth.

“It’s a huge milestone for us,” Risher said.

The company noted that people are getting out of their houses and doing things as memories of the COVID shutdown shrink in the rearview mirror.

Lyft said that rides to stadiums took off last year, growing more than 35% year over year, driven by high-attendance stadium events such as Taylor Swift and Beyoncé concerts, the U.S. Open, and football games.

Lyft: ‘People are getting out more’

“What we’ve seen over the past three quarters is people are getting out more and connecting with the world around them,” CFO Brewer said. “They’re commuting, traveling, heading to events, and gathering with family and friends.”

“Based on what we’re seeing and hearing, our expectation is that these trends will continue and, as a result of the ride-share backdrop, will remain healthy,” she added.

Meanwhile, thousands of gig workers from Uber, Lyft, and even DoorDash are expected to go on strike on Feb. 14 as employees continue to express dissatisfaction with their treatment by the companies.

Still and all, for the most part, analysts seemed to like what they were hearing from Lyft.

Wedbush analyst Scott Devitt raised his price target on Lyft to $15 from $14 while maintaining a neutral rating on the shares.

“We are encouraged by the improving intermediate-term growth trajectory of the business and are raising our bookings and revenue estimates to reflect rising trip frequency and modest growth in bookings per ride this year,” he said to investors.

Devitt said he maintained his neutral rating “as we monitor the sustainability of the company’s recent improvements in growth.”

Canaccord analyst Mike Graham raised his price target on Lyft to $20 from $18 while affirming a buy rating on the shares.

The analyst said the company reported another solid quarter with results aligned with still modest top-line expectations and again well ahead of profitability.

Analyst keeps underperform rating

Truist raised the firm’s price target on Lyft to $15 from $13 while keeping a hold rating on the shares.

More Wall Street Analysts:

The company’s strategy early last year to focus on pricing, customer experience, and product improvement as competitive differentiators bore fruit in the fourth quarter, the firm said, with results showing accelerating growth in rides and ride frequency.

A healthier marketplace and sustained momentum quarter to date [bode well] for the first quarter, Truist added.

Bank of America analyst Michael McGovern raised his price target on Lyft to $12.50 from $10.50 but affirmed an underperform rating on the shares.

“In our view, management is making solid platform improvements, but with less growth and margin expansion than Uber in 2024 we reiterate our U/P rating,” he said in a note to investors.

And speaking of Uber (UBER) , the rival ride-sharing company said on Feb. 14 that it would buy back up to $7 billion of shares — its first buyback — following a strong recovery in ride-sharing and healthy demand at its food-delivery business.

“Today’s authorization of our first-ever share repurchase program is a vote of confidence in the company’s strong financial momentum,” CFO Prashanth Mahendra-Rajah said in a statement.