Lyft shares are crushed by weak first quarter outlook
Lyft beat the street in fourth-quarter revenue, but it wasn’t enough to reassure investors reacting to the ride-hailing company’s weak outlook for the first three months of 2023.
Lyft lowered expectations for first-quarter revenue to $975 million, down about $200 million. Analysts had expected the company to promise $1.09 billion in revenue. That guidance caused shares to plummet 25% in after-hours trading on Thursday to $12.13.
Logan Green, Lyft’s CEO and co-founder, said the colder weather would lead to a drop in bike and scooter use, putting pressure on the company’s Q1 guidance.
“Prime time is down drastically from quarter to quarter because of the increased driver supply,” Green added, noting that having more drivers is good for keeping Lyft’s service levels competitive, which could lead to better growth on the long term. Green also attributed Lyft’s lowered Q1 guidance to a slightly lowered base price “to stay competitive with the industry.”
Lyft exceeds revenue expectations
Lyft reported $1.2 billion in fourth-quarter revenue on Thursday, up 21% from the $969.9 million it generated in the same period a year ago. Full-Year 2022 revenue reached $4.1 billion, up 28% year-over-year versus $3.2 billion in 2021.
Lyft’s revenue, active rider and revenue per active rider exceed analyst expectations, ending the year with 20.36 million active riders and $57.72 in revenue per active rider, up 8.7% and 11.5% compared to last year.
Still, shareholders were more affected by Q1 corporate guidance.
Lyft needed a win after its third-quarter earnings report, when the company missed Wall Street’s estimates for revenue and active riders, sending its stock down 22%. Despite the beat, Lyft shares fell 3.16% at market close and are trading nearly 24% lower after hours.
Lyft’s net loss was $588.1 million in the fourth quarter, compared to $283.2 million the year before. Lyft attributes much of that loss to $201.3 million in stock-based compensation and related payroll tax expenses.
The company also reported a loss of $29.5 million in termination benefits and other employee expenses, as well as $9.5 million in net stock-based compensation costs, due to layoffs in the fourth quarter. In November, Lyft cut 13% of its workforce in an effort to reduce operating costs. At the time, the company had estimated that the restructuring would cost it $27 million to $32 million.
All those losses led Lyft to post a net loss of $1.6 billion for the full year, up from a net loss of $1.1 billion in 2021.
The company ended the quarter with $1.8 billion in cash.
The state of the ride-hail industry
Uber, Lyft’s main competitor and often described as “older sibling,” posted strong quarterly results Wednesday, continuing the post-lockdown streak of bookings and revenue growth. Uber said it made record rides, surpassing more than 2 billion rides globally in the fourth quarter, averaging nearly 1 million rides per hour. Gross bookings, or the value of fares paid, grew 31% year-over-year.
Uber’s total gross bookings, including delivery and freight, grew 19% to $30.7 billion. This helped Uber to hit $8.6 billion in fourth-quarter revenue, a 50% year-over-year increase that beat Wall Street estimates. And with earnings per share of $0.29, the ride-hail giant shattered earnings per share estimates by 240%.
This indicates that the condition of the ride-hail market is improving riders put the COVID-19 period firmly in their rearview mirrors. That has also led to a more competitive landscape that is weighing on Lyft’s revenue expectations in the first quarter.
“The improved market balance we are seeing today creates significant opportunities for long-term profitable growth,” Green said in a statement. “To take advantage of this opportunity, we need to ensure competitive service levels.”
Green said that to deliver strong shareholder returns, Lyft needs to strengthen its competitive position, meet more demand and reduce its fixed and variable costs. That could lead to more layoffs in the future, and Lyft’s CFO Elaine Paul hinted at earnings calls about possible headcount cuts and a shift to hiring a more international workforce. It could also mean Lyft dropping other business units.
Last July, Lyft is closing its own car rental service and laid off 60 employees. One of Lyft’s other verticals is micromobility, specifically bike and scooter sharing, but it doesn’t look like Lyft is moving away from that just yet. The company announced this last week new dockable e-scooter, which it hopes to scale faster than its small dockless scooter company. Lyft’s balance sheet shows that the company spent $115 million buying real estate, equipment and scooter fleet, but the company does not split the revenue among its various mobility offerings.
Lyft also wants to try to capture more of consumers’ transportation spending, for example through the Lyft Pink membership, which the company relaunched last November at half price. The company said it doubled its membership in the fourth quarter. Lyft also partnered with Chase to give Sapphire Reserve cardholders two years of free Lyft Pink membership status.
“In addition, by integrating services for car owners into the Lyft app, such as roadside assistance, parking and maintenance, we can provide even greater value to the approximately 75% of Lyft drivers who own a car,” said Green.