Demand for Mobility Increases
Lyft stock was boosted by a positive surprise from the company on a loss recorded in Q1. This increase is a much-needed positive catalyst after a challenging period with the pandemic-induced restrictions that weighed on demand and business revenues.
The rideshare company said it is witnessing a robust recovery in US travel demand, with much more to come in Q3 as more people become fully vaccinated against COVID-19. As a result, Lyft stock soared about 6% to trade near the $60 mark in pre-open Tuesday. Lyft stock previously slipped 11% on regulatory concerns.
“The improvements we’ve made over the last year are paying off - we’ve built a much stronger business. As the recovery continues, we are confident that we will be able to deliver strong financial results” said Logan Green, co-founder and CEO of Lyft.
“We expect to build a significantly larger company by attacking the trillion dollar plus market opportunity in front of us.”
Lyft reported an adjusted Q1 loss of $73 million, substantially lower than the $144 million loss expected by analysts, according to Refinitiv. The rideshare company expects to return to profitability on an adjusted EBITDA basis in Q3.
Lyft President John Zimmer said his company plans to leverage the reduced costs to earn more per rider as more and more passengers are expected to return in the following months. The mobility business had recently pulled forward its profitability target by three months after it announced it is selling its autonomous driving business to Toyota for $550 million.
Lyft’s net loss increased to about $427 million as a result of high compensation expenses following the company’s public debut more than two years ago. Lyft reported Q1 business sales of $609 million, beating the analysts’ estimates of $559 million.
The rideshare company has significantly cut costs amid the COVID-19 pandemic and continued doing so in the Q1 of this year, even though consumers started returning. Total costs are down over $344 million in Q1, with the company cutting nearly $2.5 billion in costs overall year-to-date (YTD).
Lyft also hoped for increased incentive spending for drivers in the following months, according to Zimmer. However, executives noted those incentives were covered by a surge in prices that riders pay at the moment as a result of higher demand compared to supply. The number of active drivers increased by over 7% since the last quarter of 2020.
However, while business continues to recover ground as the overall outlook for the mobility business improves, Lyft and its competitors are facing a new threat under US President Joe Biden’s administration, whose Labor Secretary recently commented that gig workers should be classified as employees.
But Zimmer downplayed the risks of this kind of regulation, arguing the bill is unlikely to pass in Congress.
“I honestly believe that we will continue to see common-ground, practical solutions that balance independence for drivers ... with additional benefits,” Zimmer said.
As of yesterday, Lyft stock is up 14.3% YTD.
Rideshare company Lyft reported a substantially narrower loss in Q1, saying it expects to stay on track to deliver an adjusted profit in Q3. Lyft stock moved about 6% higher in pre-open Wednesday.