Analysts bail on Lyft after latest earnings, say Uber is cementing its place as leader
Wall Street analysts say Lyft has no excuse for its poor outlook. Lyft shares fell more than 30% during premarket trading on Friday as traders weighed a weaker-than-expected guidance from the rideshare company in their latest earnings report. The company otherwise reported a drop in sales. The ride-sharing company expects revenue of about $975 million for the first quarter of fiscal 2023, or less than analyst consensus estimate of $1.09 billion, according to StreetAccount. Lyft also forecast adjusted EBITDA of between $5 million and $15 million in the first quarter. “Our Q1 guidance is a result of seasonality and lower prices, including less prime time,” CFO Elaine Paul said in a statement. LYFT 1D Berg Lyft shares plummet For market watchers on Wall Street, that was hardly a good explanation. They pointed out that even if Lyft appears to be lagging behind, Uber could be better positioned to benefit from a broader ride-sharing recovery. As of Thursday’s close, Lyft shares are up more than 47% after falling 74% in 2022. Uber stock, meanwhile, rebounded 45% after falling 41% last year. Uber shares fell more than 3% in premarket trading on Friday. JPMorgan’s Doug Anmuth downgraded shares to neutral from overweight and roughly halved its price target as Lyft failed to catch the recovery. Its $15 price target, down from $29, suggests shares should fall another 7% from Thursday’s close. “Our positive thesis on Lyft was based on the post-pandemic recovery combined with an accelerated shift to profit through cost rationalization. However, while rideshare in the US is now nearing a full recovery, Lyft is not,” Anmuth wrote in a statement Friday. “The market is normalizing with an increased supply of drivers – after a few tight years – and prices are falling. But that momentum, combined with increased insurance costs, seems to have caught Lyft off guard and is hurting its business. ‘ Grace added. Truist’s Youssef Squali downgraded the stock to hold from a buy on lower growth and margin prospects and said Lyft is falling behind Uber in the market. Additionally, Squali lowered its price target to $14 from $40. That means shares could fall another 13% since Thursday’s close. “Competitive pressures have intensified with Uber in January, with Lyft cutting its base prices to be more competitive but putting pressure on revenue growth. Lower profitability in 1Q23 is being driven by lower revenue and higher insurance costs, which appears to be more of a structural issue for Lyft than Uber (Buy),” Truist’s Squali wrote. “Importantly, mgt has withdrawn its guidance of $1 billion Adjusted EBITDA/$700 million FCF for FY24, adding further uncertainty. Uber appears to be competitively withdrawing from Lyft and cementing its place as a superior model in our view,” Squali added. Meanwhile, KeyBanc Capital Markets’ Justin Patterson downgraded Lyft from “overweight” to “sector weight” on gains, as it is “uncertain about our view of improved execution and a turnaround in earnings.” Although no price target was available to the analyst, his previous target in January was $24 for the stock. “With ~2/3 of the quarter-over-quarter revenue decline attributed to less prime-time activity and price cuts to keep up with peers, we have further questions as to whether revenue can achieve mid- to high-teens growth in 2023E,” wrote patterson . Finally, Loop Capital Lyft’s Rob Sanderson downgraded it to hold from buy and lowered the price target to $10 from $17. The new price target implies a 38% decline from where shares closed on Thursday. He said the disappointing earnings were due to a “fundamental improvement” in market conditions. “Management’s mea culpa appears to be that the company overearned by inflating pricing amidst supply constraints (bump pricing), an issue they downplayed only to appear to be caught off guard,” Sanderson wrote. – CNBC’s Michael Bloom contributed to this report.