Lyft swung to a surprise profit in the second quarter as the ride-hailing company's revenue grew a better-than-expected 41%. But Lyft stock tumbled Wednesday on weaker-than-expected total bookings and disappointing guidance for the current quarter.
Lyft said early Wednesday that it earned 1 cent per share on revenue of $1.436 billion in the June-ended quarter. That marked Lyft's first-ever quarterly profit based on generally accepted accounting principles. Analysts had forecast the San Francisco-based company would post a loss of 3 cents per share on sales of $1.4 billion, according to FactSet.
A year earlier, Lyft lost 30 cents per share on sales of $1 billion for its Q2 2023.
"For over a year you've heard us say that customer obsession drives profitable growth," Chief Executive David Risher said in a news release. "In Q2 we delivered, and drivers and riders are choosing Lyft in record numbers."
Lyft Bookings Miss Estimates
While Lyft's revenue topped expectations, the company missed the mark on gross bookings, or the total value of transactions booked through Lyft. Gross booking rose 17% to $4.02 billion for the June-ended quarter, slightly missing estimates of $4.07 billion.
For the current quarter, Lyft guided for gross bookings of $4 billion-$4.1 billion. Analysts had projected Lyft would tally $4.15 billion in bookings for the September-ending quarter, according to FactSet.
On the stock market today, Lyft stock plunged 17.2% to close at 9.08, a 2024 low.
Lyft's larger rival Uber also gave lower than expected bookings guidance when it reported results Tuesday. But Uber's forecast for adjusted earnings was above expectations. Uber stock jumped 10% in Tuesday trading.
Lyft, however, also gave lower guidance for earnings before interest, taxes, depreciation and amortization, or EBITDA. The company said to expect EBITDA between $90 million and $95 million for the September quarter, compared to forecasts of $103 million.
Lyft Focuses On Cutting Surcharges
To keep pace with Uber, Lyft is focusing on offering more reliable prices. Risher told analysts Wednesday that the company is reducing instances of Prime Time pricing, when rates are higher because of higher rider demand or lower driver supply. For Uber it is called surge pricing.
Pledging to "open up a can of whoop-ass on Prime Time," Risher said Lyft is testing a subscription service called Price Lock that guarantees the cost of certain routes at certain times for a rider.
"Prime Time won't ever completely go away, it's an important way to match supply and demand when demand spikes quickly," Risher said. "But with innovations like Price Lock, we can chip away at how often it occurs and hopefully take what I'm willing to bet is rideshares most-hated feature and turn it into a reason to choose Lyft."
Analysts offered support for the concept, with some concerns.
"While we think reliably lower prices are a long-term positive for Lyft, we are cautious on the potential short term impacts and how long it could take consumers to increase volumes, which would offset pricing for Lyft," Needham analyst Bernie McTernan wrote to clients Wednesday. Needham has a neutral hold rating for Lyft.
Evercore ISI analyst Mark Mahaney also remained neutral on Lyft's stock following the report.
"The key question for Lyft remains the company's ability to sustain top-line growth while also ramping profitability," Mahaney wrote to clients Wednesday. "While on a standalone basis we see Lyft's valuation as reasonable, we would like to see improving positive fundamental trends to become positive on Lyft shares."
Lyft Stock Gained On Uber's Q2 Results
With Wednesday's slump, Lyft stock is down nearly 40% year to date. The stock has slumped amid concerns about Tesla launching its own robotaxi service and growing fears of a U.S. recession.
Coming into the report, Lyft stock had an IBD Composite Rating of 45 out 99, according to IBD Stock Checkup. The score combines five separate proprietary ratings into one rating. The best growth stocks have a Composite Rating of 90 or better.
Further, Lyft's IBD Relative Strength Rating was 16 out of 99. The RS Rating means that Lyft has outperformed just 15% of all stocks in IBD's database over the past year.
