Lyft Quarterly Revenue Jumps About 50%, Expects Profitability by End of Next Year

Lyft Inc, an American ridesharing company based in California, said its revenue jumped about 50% in the third quarter of 2020 and number of active riders increased nearly 45% to 12.5 million as demand recovered, but that is still lower than what it was in the third quarter of 2019.

The ride-sharing company said its third-quarter revenue fell to $499.7 million, surpassing average analyst expectations of $486.5 million, according to Reuters. Lyft said it delivered Q3’20 adjusted EBITDA loss of $240 million versus most recent outlook of $265 million. The company executive said it is focused on achieving adjusted EBITDA profitability by end of next year.

Lyft said its active riders increased to 12.5 million in Q3, up 44% from the previous quarter but about half the level of 22.3 million in the same period last year. revenue per active rider increased 2% versus Q2’20 reflecting an improvement in ride frequency, the company said.

“Lyft posted better-than-expected third-quarter top-and bottom-line results as sequential improvement in ride service demand accelerated. Lyft’s cost control, especially on marketing lowered the operating loss. While higher demand continued through October, we think the latest wave of coronavirus cases across the U.S. will slightly slow down the recovery in the remainder of 2020. However, with a likely gradual economic recovery in 2021 accompanied by an increase in commute and travel, we expect Lyft ridesharing revenue to return to strong double-digit growth next year,” said Ali Mogharabi, senior equity analyst at Morningstar.

“Still, we do not expect Lyft to hit 2019 revenue levels until 2022. While in its early stages, the firm’s efforts to partake in the growing but very competitive delivery space represents some upside to revenue in 2021 and beyond. We made minor adjustments to our model, which did not change our $50 fair value estimate. While the stock has more than doubled since its March lows, with the risk of California Proposition 22 out of the way (as we expected in our note published on Aug.  13), another 39% potential upside remains, making this narrow-moat name still attractive, in our view,” Mogharabi added.

Lyft shares closed 4.35% lower at $36.05 on Tuesday; the stock is down over 15% so far this year.

Lyft Stock Price Forecast

Twenty-one equity analysts forecast the average price in 12 months at $42.74 with a high forecast of $66.00 and a low forecast of $31.00. The average price target represents an 18.56% increase from the last price of $36.05. From those 21 analysts, 15 rated “Buy”, six rated “Hold” and none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $31 with a high of $49 under a bull-case scenario and $16 under the worst-case scenario. The firm currently has an “Equal-weight” rating on the ride-sharing company’s stock. RBC lowered their stock price forecast to $46 from $48; BTIG increased the target price to $50 from $40; Jefferies upped their stock price target to $45 from $40.

Several other analysts have also recently commented on the stock. Piper Sandler raised the target price to $39 from $31; Evercore ISI upped their stock price forecast to $50 from $48; Truist Securities lowered their price objective to $44 from $49; Guggenheim increased the target price to $38 from $35; Deutsche Bank raised their stock price forecast to $55 from $52; Bernstein decreased the target price to $28 from $33.

Analyst Comments

“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.”

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