Lyft has been struggling to keep up with the competition, and its revenue in the fourth quarter was slightly lower than investors were hoping for. However, this didn’t assuage their concerns about Lyft’s weak first quarter guidance for next year. Therefore, investors are likely to remain hesitant about the company’s future prospects.
The news that Lyft plans to generate $975 million in revenue for the first quarter of 2019 was less than expected, causing shares to plummet 25% after hours. Analysts had predicted the company would promise $1.09 billion in revenue, so this shortfall may have investors worried about whether or not Lyft can continue to grow at a rapid pace.
Lyft is facing pressure from the colder weather to decrease its ride-hail and bike and scooter usage, putting increased pressure on their Q1 guidance.
Lyft is seeing a significant increase in driver supply, which is causing the company’s prime time to fall significantly from quarter-over-quarter. Lyft is doing this in order to stay competitive and grow its service levels, which could lead to greater long-term success.
Lyft surpasses revenue expectations
The Lyft ride-sharing company has seen a steady rise in revenue and user numbers over the past few years. In the fourth quarter of this year, they generated $1.2 billion in revenue, which is an increase from $969.9 million from last year- same quarter. This amount is projected to reach $4.1 billion by the end of 2022, which is a 28% increase from last year’s figures. With such an impressive growth rate, we can expect more innovative features and services to be added to the Lyft offering in future quarters!
Lyft has once again blown past analysts expectations by exceeding 20 million active riders and earning $57.72 per active rider in 2017. It’s clear that the Lyftites are becoming increasingly loyal, with their continued demand driving revenue up by 8.7% and 11.5% from last year respectively. This strong performance proves that the company is continuing to grow its user base and maintain a positive cash flow despite stiff competition from Uber Technologies Inc.
Despite the poor stock performance, many shareholders were more affected by the company’s guidance for the first quarter. The main reason for this pessimism stems from weaker-than-expected demand in North America and Europe, as well as a slowdown in China. In addition, Nike expects a decrease in profits due to increased competition both domestically and abroad
Despite the beat, Lyft shares dropped 3.16% at market close, and are trading nearly 24% lower in after hours. Wall Street analyst predictions for Lyft’s third quarter earnings call were not met, causing investors to spook the stock 22%. Users on the platform seem unhappy as well; by late afternoon on Wednesday, there was already a large queue of people waiting to be picked up by Lyft drivers in major cities across North America.
Lyft is facing increased competition from Uber, which is spending more money to expand its operations. Lyft has been struggling to keep up with the competing company’s investments, and its stock price has fallen as a result.
Lyft’s recent layoffs have impacted its bottom line, as the company has had to expense $29.5 million in severance and other employee costs, as well as $9.5 million in net stock-based compensation expense. These expenses may increase in future quarters as the company continues to try to reduce its operating expenses. Despite these setbacks, Lyft is still expecting annual revenue of around $2 billion by 2019 thanks to their global reach and strong user base.
The staggering losses for Lyft indicate that the ride-hailing industry is still in a difficult phase. Whether it be technological challenges or adapting to changing customer preferences, Lyft will need to continue making significant improvements if it wants to remain competitive.
The company’s cash holdings and its ability to meet short-term debt obligations give it a strong financial foundation, which will help it endure difficult times. The company is also optimistic about its future prospects, noting that global demand for luxury goods continues to grow.
The state of the ride-hail industry
Uber has been riding high since the sexual assault and harassment scandals of 2018, posting record bookings and revenue growth. While Lyft has been struggling to keep up, the San Francisco-based company reported strong fourth quarter results Wednesday. Uber said it hit record trips, surpassing 2 billion trips globally in the fourth quarter, which averages almost 1 million trips per hour. Gross bookings, or the value of fares paid, grew 31% year-over-year.
One of Uber’s key strengths is its ability to grow quickly. This was especially apparent in the fourth quarter, when the company grew revenue by 50% and EPS by 240%. This profitability is a direct result of Uber’s aggressive expansion into new markets and its decision to fight for market share. In particular, its growth in delivery and freight helped it exceed Wall Street expectations.
Lyft is confident that the COVID-19 pandemic will not have a lasting negative impact on their growth prospects. They report that ridership has increased consistently in recent months and that they are seeing growing demand for their services from both commuters and tourists. This suggests that Lyft is thriving in a more competitive ride-hail marketplace, where they are putting pressure on their rivals to improve their services.
The American broadband service provider, Comcast Corporation (NASDAQ:CMCSA), recently announced plans to improve its marketplace balance by increasing its investment in services such as Xfinity TV and Internet. This move is intended to create better consumer experiences and increase the company’s share of the fast growing broadband market. Comcast’s announcement follows reports of increased competition from companies such as AT&T Inc. (NYSE:T) and Verizon Communications Inc. (NYSE:VZ). In addition, the rising cost of technology upgrades has pressured manybroadband providers into making improved services a top priority in order to maintain customer loyalty.
After Lyft delivered strong shareholder returns in 2017, investors are demanding even more from the company. This demand might mean larger layoffs in the near future, as well as a shift towards a more international workforce. These changes could mean dropping other business lines to invest in Lyft’s core market of on-demand rides.
Lyft’s new dockable e-scooter might be a step in the right direction for the company, as it looks to scale its micromobility business faster than its small dockless scooter business. However, Lyft’s revenue by mobility offering is still unknown, so it is difficult to tell if this move will be successful.
Lyft is looking to capture more of the consumer transportation spend through its Lyft Pink membership, which it re-launched last November at half the price. Lyft also partnered with Chase to deliver Sapphire Reserve card holders two years of free Lyft Pink membership status. This allows riders to get a discounted ride at every ride and potentially increase their travel options within the city they are in.
The Lyft integration with services for car owners will allow riders to get more value out of their rides by providing roadside assistance and maintenance services. This is great news for the majority of Lyft riders who own a car, as it means they can maximize their transportation options without having to worry about things like engine repairs or parking.
