Shares of Lyft (LYFT) are now trading around almost 40% below recent highs, seemingly punished due to perceived pressures of the Omicron variant. While the company's financials have been resilient, supporting a more positive earnings outlook, ongoing pandemic disruptions remain a headwind for the company, especially given the fact that the core of Lyft's service is based on transportation and mobility.
Is now an ideal time to ride Lyft’s recovery? This question, and other questions, will be one of several topics that the company must address when it reports fourth quarter fiscal 2021 earnings results after Tuesday’s closing bell. Lyft is still waiting for demand to recover to pre-pandemic levels. In terms of operating performance in the quarters ahead, Lyft has demonstrated it is well-positioned to capture market share and outperform growth expectations. Does the current share price present value?
That’s one of the main questions investors are asking, especially when assessing for opportunities to play the pandemic re-opening. Execution has been solid, evidenced by increases in both revenue per rider and active riders which have trended well over the past several quarters. Notably, revenue per active rider is higher on a two-year comparison. The company has also done a solid job improving its cash flow profile which also reduces some of the near term risk. For that to matter, Lyft on Tuesday must deliver a top and bottom line beat, along with strong guidance.
For the quarter that ended December, Wall Street expect Lyft to earn 9 cents per share on revenue of $938.86 million. This compares to the year-ago quarter when it reported a loss of 58 cents per share on revenue of $569.9 million. For the full year, ending in December, the loss is expected to be 21 cents per share, compared to $2.66 per share loss a year ago, while full-year revenue is expected to rise 34.4% year over year to $3.18 billion.
The projected full-year revenue increase of almost 35% is impressive, given that the estimate has been rising over the past several weeks even as the stock has been under pressure. Notably, however, the expected $3.21 billion would still be below the $3.6 billion the company posted at the peak of 2019. In other words, Lyft is still working to reach pre-pandemic levels. From a profitability perspective, the expected loss of 39 cents per share is a drastic improvement from $2.66 per share a year ago.
Meanwhile, management’s cost-cutting initiatives to drive improved profitability is having a strong effect. In the third quarter, the company beat on both the top and bottom lines, thanks to strong diver metrics. Lyft posted its second straight quarter of positive adjusted EBITDA profitability. Notably, the company’s net loss continues to decline, reporting a $71.5 million net loss on revenue of $864 million. This compares to the second quarters when the net loss was $251.9 million on $765 million in revenue.
CFO Brian Roberts said that the positive success was "a demonstration of the strong leverage in our operating model.” What’s more, driver supply improved significantly, rising nearly 45% year over year. All told, when factoring the divestment of its self-driving business, Lyft management is pushing all of the right buttons. And with the stock, currently at $38 per share, trading some 41% below its 12-month price target of $65, betting on a rebound seems like a solid bet to make.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Richard Saintvilus
After having spent 20 years in the IT industry serving in various roles from system administration to network engineer, Richard Saintvilus became a finance writer, covering the investor's view on the premise that everyone deserves a level playing field. His background as an engineer with strong analytical skills helps him provide actionable insights to investors. Saintvilus is a Warren Buffett disciple who bases his investment decisions on the quality of a company's management, its growth prospects, return on equity and other metrics, including price-to-earnings ratios. He employs conservative strategies to increase capital, while keeping a watchful eye on macro-economic events to mitigate downside risk. Saintvilus' work has been featured on CNBC, Yahoo! Finance, MSN Money, Forbes, Motley Fool and numerous other outlets. You can follow him on Twitter at @Richard_STv.
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