Despite selloff of the stock, Lyft’s (LYFT) business continues to operate well. Not only has the company surpassed top and bottom line estimate in five straight quarters, during that span the company has also delivered strong profits. But the stock, which is down 67% year to date, has not reflected Lyft’s level of execution.
Investors want to know if now is an ideal time to ride Lyft’s recovery. This question, among others, will be one that the company must answer when it reports third quarter fiscal 2022 earnings results after Monday’s closing bell. Despite the selloff, the company continues to enjoy a strong rebound in rider demand, which was reflected in both the first quarter and second quarter results; Lyft ended the second quarter with 19.86 million active riders.
Currently commanding 29% market share in the U.S., Lyft is the second-largest ride-sharing company next to Uber (UBER). While questions remain regarding the company’s international expansion initiatives as well as driver incentives, there are still tons of catalysts to propel Lyft higher and sustain growth over the long term. Still, for the stock to rebound from current levels, Lyft not only must deliver a top- and bottom-line beat Monday, it also needs upside guidance that lays out a path towards stronger profitability.
For the quarter that ended September, Wall Street expect Lyft to earn 8 cents per share on revenue of $1.06 billion. This compares to the year-ago quarter when earnings were 5 cents per share on revenue of $862.68 million. For the full year, ending in December, the company is expected to earn 40 cents per share, compared to 25-cent per share loss a year ago, while full-year revenue is expected to rise 27.1% year over year to $4.08 billion.
The expected full-year earnings of 40 cents per share would be 10 cents better than the forecast from three months ago. The improved profitability has been an increased focus of the company, including trimming its headcount. In July, the company initiated a reorganization of its global operations, closed some regions and laid off roughly 60 employees. That was just the beginning, however. The company last week announced plans to lay off 13% of its workforce, or close to 700 employees.
While the restructuring and layoff would costs the company between $27 million and $32 million, which is expected to be incurred in the fourth quarter, Lyft is poised to emerge much leaner when fiscal 2023 begins. Its heightened focus on cost cuts helped the company deliver a top and bottom line beat in second quarter as it reported adjusted EPS of 13 cents per share on $990.7 million in revenue, topping analysts estimates for an adjusted loss of 4 cents per share on revenue of $988.14 million.
During the quarter, the company generated an average revenue per active rider of $49.89, slightly topping estimates. The company continues to benefit from the rebound in corporate travel, which helped generate $79.1 million in adjusted EBITDA during the quarter, the highest in its history. For context on how much profitability has improved, Lyft generated $55.3 million in adjusted EBITDA in Q2 of 2021 and $24.3 million in Q1 of 2022. Lyft’s management continues to execute on the company’s main objectives to drive value.
Value investors may see this as an opportunity to add the stock to their portfolio; that said, for the stock to rise, Lyft on Monday must provide upside guidance, along with a sustained path towards stronger profitability.
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