Lyft shares tumbled close to 14% in premarket trading on Wednesday after the company issued weaker-than-expected guidance for first-quarter gross bookings, raising concerns about its ability to compete with larger rival Uber Technologies.
The sentiment is also hampered as several analysts have reduced their target price on the stock.
The ride-hailing platform has been pursuing aggressive strategies to attract riders, including competitive pricing and new features.
However, its efforts were impacted by external factors such as wildfires and extreme weather in key markets.
For the first quarter, Lyft forecast gross bookings in the range of $4.05 billion to $4.20 billion, falling short of Wall Street’s expectation of $4.26 billion.
This mirrors a similar underwhelming forecast from Uber last week, signaling broader challenges in the ride-hailing sector.
At least six brokerages reduced their price targets for Lyft following its fourth-quarter results, bringing the median target price to $18, according to LSEG data.
Lyft’s 12-month forward price-to-earnings ratio stands at 13.8, significantly lower than Uber’s 30, highlighting its valuation gap. In 2024, Lyft shares declined 13.94%, but the stock has rebounded 11.55% so far this year.
Lyft’s Q4 earnings disappoint
Lyft reported a record-high revenue of $1.55 billion for the December quarter, reflecting a 26.6% increase year-over-year, in line with analysts’ expectations of $1.56 billion, according to LSEG.
The company also achieved its first full year of positive free cash flow and profit in 2024. Adjusted profit for the fourth quarter was 29 cents per share, exceeding estimates of 22 cents.
Total revenue rose 27% year-over-year, while gross bookings reached $4.3 billion, representing a 15% year-over-year increase.
Active riders totaled 24.7 million in the fourth quarter, up 10% compared to the previous year, with total rides surpassing 219 million, a 15% year-over-year growth.
Additionally, Lyft’s board authorized a share repurchase program of up to $500 million of the company’s common stock.
Wall Street analysts on Lyft
On Wednesday, Goldman Sachs analyst Eric Sheridan maintained a “neutral” rating on Lyft with a price target of $20.00.
The analysts noted that gross bookings for the fourth quarter were at the lower end of the company’s guidance range.
Additionally, the high-end guidance for Q1 2025 gross bookings fell below market expectations, attributed to challenges arising from reduced prices in the US market.
JPMorgan lowered the price target from $19 to $16 while maintaining a “neutral” rating.
The firm’s analysts acknowledged Lyft’s improved execution over the past year, with notable strides in product innovation and service enhancements for both drivers and riders.
However, JPMorgan raised concerns about growing competition in the rideshare industry, particularly during the latter part of the fourth quarter and into the first quarter.
While Lyft continues to demonstrate a robust gross profit margin of 33.9% and maintains a stronger cash position than debt on its balance sheet, the competitive pressures are weighing on the company’s market performance, as per the brokerage firm.
Barclays and Evercore ISI also cut target prices for the stock.
Barclays analyst Ross Sandler downgraded the price target on Lyft to $19 from $20, while Evercore ISI reduced its price target to $15 from the previous $19.
Lyft’s autonomous driving initiatives
Lyft has announced plans to launch a fleet of robotaxis equipped with Intel’s Mobileye self-driving technology in Dallas as early as 2026.
The company aims to expand the fleet to “thousands” of vehicles in additional markets in the months following the initial launch.
To emphasize its commitment to this initiative, Lyft has partnered with Marubeni, a Japanese conglomerate, to manage fleet operations.
Marubeni will own and finance the Mobileye-equipped vehicles that will be available through Lyft’s ride-hailing app.
While Lyft has not revealed the carmaker it is partnering with for the robotaxi launch, Mobileye’s advanced driver-assistance technology is already featured in vehicles from automakers such as Audi, Volkswagen, Nissan, Ford, General Motors, and others.
The post Lyft shares continue slide after Q4 earnings: here’s why the stock is down 14% appeared first on Invezz
