Lyft sheds $1.1 billion in market value as shares hit new lows after analyst downgrade

Analysts hailed Uber Technologies Inc. as a ride-sharing favorite on Tuesday, as Lyft Inc. posted quarterly results that showed it felt some pressure from its larger rival, sending Lyft shares to record lows.

Lyft LYFT,
Shares, which fell as much as 20% in premarket trading, closed down nearly 23% on Tuesday at an all-time low of $10.90. The company lost $1.169 billion in market capitalization, and its shares, down almost 75% year to date, are heading for their worst year on record.

The ride-hailing company posted mixed third-quarter results on Monday afternoon, which showed excessive ridership even as Lyft benefited from pricing trends. Lyft’s results disappointed investors and analysts alike, as at least one on Wall Street downgraded it.

“We would like to own more of UBER given its superior scale and business model. [geographic] diversification,” wrote the Evercore ISI team led by Mark Mahaney. “So don’t download.”

Analysts at Evercore sharply cut their price target on Lyft from $41 to $18 a share and cut their rating to in-line from outperform.

Mahaney was concerned about Uber’s 1% market share loss and a decline in the “real potential” of consumer demand in 2023, though that’s not yet certain. However, recent customer trends have been disappointing for him.

“We believed the company’s significant exposure to West Coast markets and Shared Rides would drive strong Ridership and Revenue recovery. [the second half of 2022],” he wrote. “It could still happen, and it could just be a delay here, but the particularly weak growth in Q3 Active Riders … has us very concerned.”

Mahaney noted that the company added 452,000 active drivers in the quarter, compared with 2.1 million in the second quarter and 1.8 million in the third quarter.

Lyft Shareholder Buoyed by Growth Concerns. Uber Shades Its Rival.

JPMorgan analysts agreed. They said they still prefer Uber, but could see an attractive risk-reward balance in Lyft stock “if the company can make progress toward its 2024 targets.”

Those 2024 targets include adjusted earnings before interest, taxes, depreciation and amortization (Ebitda) of $1 billion. Lyft also stuck to its goal of at least $700 million in free cash flow.

Lyft executives told analysts that even in a recession, they are confident they will meet their goals because rising unemployment will attract people to drive for Lyft.

But JP Morgan’s Doug Anmuth said Lyft’s stock is more of a “show” story. They believe Lyft will achieve Ebitda margins, but “investors will come away more mixed.”

Bernstein analysts were also in “wait and see” mode on Lyft’s Ebitda target.

“Increased insurance costs and softer-than-expected driver growth are weighing on sentiment as the mix of Ebitda growth drivers is less favourable,” said the Nikhil Devnani-led team.

Brad Erickson of RBC Capital Markets emphasized that Uber’s actions put pressure on Lyft.

Lyft management noted that Uber temporarily spent more money on driver incentives during the quarter, though Uber appears to have scaled those back. Regardless, Erickson said, the announcement “suggests” that Uber could use its larger and more diversified revenue report to “divert Lyft’s share without appreciably impacting Uber’s profitability.” [this] It could easily remain an ongoing challenge for LYFT moving forward,” he said.

He maintained his sector outperform rating and $16 price target on the stock due to Lyft’s “structural competitive disadvantage” against Uber.

However, DA Davidson’s Tom White praised the company’s efforts across its customer base — what he called active riders — and affirmed a buy rating but lowered his price target to $19 a share from $25.

Lyft’s active ridership was up 7% from the same period in 2021, but was below Wall Street estimates.

“While we have some concerns about the speed and breadth of Lyft’s broader post-pandemic revenue recovery, the company has done a solid job of monetizing its Active Rider base over the past few quarters,” he said.

This story has been updated with Lyft’s closing price and other information.

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