Lyft Inc, an American ridesharing company based in California, said its revenue plunged 61% in the second-quarter and number of active riders dropped by 60% to 8.69 million as the COVID-19 pandemic drastically affected business, sending its shares down over 1% in after-hours trading on Wednesday.
The ride-sharing company said its revenue slumped to $339.3 million in the second quarter ended June 30, 2020, versus $867.3 million in the second quarter of 2019, a decrease of 61% year-over-year.
Lyft said its restructuring effort to reduce operating expenses and adjust cash flows, announced in April 2020, is on track to reach its objective of becoming profitable by the end of next year. The number of active riders tumbled 60% to 8.69 million in Q2.
“We view 3Q20 earnings as the next major catalyst, as well as any updates on LT projections and/or any regulatory or legal proceedings related to ridesharing, and updates on COVID-19 impact,” said John Blackledge, equity analyst at Cowen.
“We forecast 23% annual revenue growth’20-’30 driven by ~12% active rider growth over the period and expect EBITDA to turn positive by ’22 with 42% annual EBITDA growth from ’23 to ’30,” Blackledge added.
Lyft shares closed about 0.42% lower at $30.52 on Wednesday. The stock has declined about 30% so far this year.
“In Q2, we successfully limited our Adjusted EBITDA loss, outperforming the outlook we shared on our Q1 call by more than 20%. We continued to take aggressive actions to reduce costs and increase our underlying unit economics in the quarter, which has put Lyft on track to achieve $300 million of annualized fixed cost savings by the end of the year,” said Brian Roberts, chief financial officer of Lyft.
“These steps position the Company to achieve adjusted EBITDA profitability with 20 – 25% fewer rides than originally contemplated in our fourth quarter 2021 target.”
Lyft stock forecast
Nineteen analysts forecast the average price in 12 months at $44.79 with a high forecast of $66.00 and a low forecast of $30.00. The average price target represents a 46.76% increase from the last price of $30.52. From those 19, 13 analysts rated ‘Buy’, six analysts rated ‘Hold’ and none rated ‘Sell’, according to Tipranks.
Morgan Stanley target price is $34 with a high of $52 under a bull scenario and $20 under the worst-case scenario. BTIG lowered the target price to $40 from $52 and RBA raised the target price to $48 from $47.
Several other equity analysts have also updated their stock outlook. Lyft had its price target dropped by Jefferies Financial Group to $40 from $50. The brokerage presently has a “buy” rating on the ride-sharing company’s stock. Credit Suisse Group lowered their target price to $66 from $75 and set an “outperform” rating. At last, RBC upped their price target to $51 from $47.00 and gave the company an “outperform” rating.
We think it is good to hold for now as 100-day Moving Average and 100-200-day MACD Oscillator signal a selling opportunity. However, can target $20 under a worst-case scenario.
“How Big is Lyft’s Active Rider Opportunity? We view Lyft’s primary addressable market as 18-50-year olds living in MSAs with a household income of $50K+. We estimate (at most) 24% of this demographic were Lyft users in ’18. We expect the more rational duopoly structure in North America to lead to rising adjusted take rates and faster revenue growth for Lyft,” said Brian Nowak, equity analyst at Morgan Stanley.
“We don’t see Lyft generating positive adj. EBITDA until ’22 but expect healthy operating leverage due to insurance and sales and marketing efficiencies,” he added.
Upside and Downside risks
1) Less than expected impact from COVID-19. 2) Faster than expected rationalization in US rideshare industry. 3) Positive resolution of AB5, Morgan Stanley highlighted as major upside risks to Lyft.
1) Greater than expected impact from Covid-19. 2) Slower than expected market rationalization. 3) Inability to spur user/frequency growth through lower prices, higher liquidity and innovation. 4) Regulation as Lyft faces municipal, country and labour regulatory/legal challenges, were major downside risks.
This article was originally posted on FX Empire