Should Lyft Have Been Given THIS Much Anti-Uber Earnings Reaction?

Technology

Published: February 12, 2020 2:49 pm

Last Updated: February 13, 2020 7:15 am

Lyft Inc. (NASDAQ: LYFT) was up 0.4% at $53.94 on Tuesday ahead of earnings, but its shares fell somewhat harshly in the post-earnings reaction despite beating sales expectations and showing a 23% jump in active riders. The move is exactly the opposite of what was seen in rival Uber Technology Inc. (NYSE: UBER), and Lyft is generally considered by investors to be a more focused company in the ride-hailing business.

What is interesting about the reaction in Lyft is that the analyst community was very mixed about the call. Uber’s post-earnings reaction saw analysts pile deep into the stock with more aggressive targets. There is also still some debate out there about what exactly Uber’s “profitability metrics for the fourth quarter of 2020” will really translate to.

With a 52% sales growth in the last quarter, Lyft is not seeing any major growth concerns. The ride-hailing service showed a 23% gain in active riders (now 22.9 million) and saw a 23% jump in revenue per active rider (to $44.40).

Credit Suisse maintained its Outperform rating on Lyft. The firm has a serious upside target price of $96 here. Its report said that Lyft was still investing while also expanding its margins while showing upside. Although the 2020 adjusted EBITDA guidance was ahead of the firm’s and the consensus estimates, there is a concern of higher incremental R&D and policy initiatives. The firm saw Lyft’s margin guidance as conservative based on the likelihood for expansion with either existing or additional carriers.

Canaccord Genuity reiterated its Buy rating and with a $70 target price, noting that Lyft’s pace of outperformance moderated somewhat in the fourth quarter. Still, it sees strong momentum behind a profitable growth plan.

CFRA maintained its Buy rating on Lyft with its $70 target price. CFRA also narrowed its annual loss per share targets to $1.63 from $2.52 (per share) for 2020 and to $0.78 from $1.42 for 2021. The research firm noted that Lyft had an increasing focus toward profitable growth and it was favorable that management placed a greater emphasis on higher value rides and riders rather than growing for the sake of growth at any cost. It also sees Uber and Lyft having a stable pricing landscape through 2021 and that the companies appear to be in a cooperative duopoly, even if growth should decelerate off a higher base. CFRA said:

We think ridesharing remains an under-penetrated market and like profitability potential given Lyft’s scalable/recurring business model. We see opportunities for Lyft to lower insurance costs, providing upside to 2020 contribution margin expectations.

Other analysts on Wall Street had rather mixed views on Lyft’s earnings.

SunTrust Robinson Humphrey maintained Lyft as Buy and cut its target to $74 from $75.
Stifel maintained its Buy rating but trimmed its target price to $56 from $60.
Wells Fargo reiterated an Overweight rating and raised its target to $70 from $60.
RBC Capital Markets maintained its Outperform rating while cutting its target to $75 from $82.
Goldman Sachs reiterated its Buy rating and raised its target to $64 from $58.
Morgan Stanley maintained its Equal Weight rating but trimmed its target $54 from $56.

Lyft shares were last seen down 9.8% at $48.67 on Wednesday afternoon, and the 29 million shares traded with about 90 minutes left of trading was already about five times normal volume. Its 52-week, or post-IPO, trading range is $37.07 to $88.60, and Lyft’s formal IPO price was $72 (above the initial $62 to $68 range).

Shares of Uber were last seen trading up 11 cents at $41.37, with a post-IPO range of $25.58 to $47.08. Uber’s IPO price was $45 per share, and it was considered a weak IPO after Lyft shares had lost close to one-third of their value after the first two months of trading in 2019. Uber was basically a $37 stock right before its recent earnings.