Why Lyft Stock Plunged Today
Shares of Lyft (NASDAQ: LYFT) were taking a dive today after the No. 2 ride-sharing company posted disappointing results in its second-quarter earnings report last night.
As a result, the stock closed the day down 17.2%.
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Q2 results were strong
Lyft's second-quarter results were strong, but weaker third-quarter guidance seemed to spook investors.
Second-quarter revenue jumped 41% year over year to $1.44 billion, beating the consensus of $1.39 billion. Active riders increased 10% to 23.7 million, and rides rose 15% to 205 million. Other favorable indicators included the biggest jump in new drivers since 2019, a surge in rides related to Pride festivals in June and college graduation weekends. Additionally, rides in Canada doubled as Lyft gained traction in the new market.
On the bottom line, the company delivered solid results as adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) jumped from $41 million in Q2 2023 to $102.9 million, and it reported its first-ever generally accepted accounting principles (GAAP) profit with net income of $5 million and a per-share profit of $0.01.
On an adjusted basis, the company reported a per-share profit of $0.24, which topped estimates of $0.19.
CFO Erin Brewer said, "Our platform is growing in a very healthy way as evidenced by the strength of our financial results, including strong cash flow generation and GAAP net income."
Guidance was disappointing
Looking ahead to the third quarter, Lyft expects gross bookings of $4 billion to $4.1 billion, essentially flat from the second quarter, and it sees a sequential decline in adjusted EBITDA to $90 million-$95 million. For the full year, it's targeting mid-teens growth in rides and positive free cash flow.
The slowdown in bookings growth seems to be a reflection of lower prices due to an increase in driver supply and other improvements, which should pay off over the long run. Overall, the sell-off seems excessive as Lyft continues to grow and improve its cost structure with profitability ramping up.
The stock now looks cheap at a price-to-earnings ratio of just 11.
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Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
