Ride-sharing company LYFT (NASDAQ:LYFT) has generated some buzz recently, with Q1 top- and bottom-line beats and guidance from management pointing towards a potential 15% annual gross increase. For a long time, it served as a distant second to Uber (NYSE:UBER). Still, these recent revelations have bolstered the belief that there’s enough space in the domestic market for multiple key players, making the stock an interesting opportunity for value-oriented investors.
However, concerns continue as automated taxis could potentially crash the ride-sharing market and threaten Lyft’s future.
Lyft Is Making Progress
Lyft is a ride-sharing platform primarily operating within the U.S. and Canada. The company has posted impressive progress lately, including a notable upturn of 23% in rides year-on-year, reaching 188 million customers. This significant growth was particularly noticeable during morning commutes and weekend evenings. Additionally, active riders increased by 12% year-over-year, signaling an improved rider retention to help increase revenue.
The introduction of Women+ Connect, a feature that encourages women and nonbinary riders and drivers to ride together more often, was successful. It resulted in an almost 24% increase in activations by women and nonbinary drivers year-over-year in the first quarter. The feature has marked itself as one of Lyft’s top-rated offerings, as most drivers who utilize it report feeling safer while driving with Lyft.
The company aims to reach $25 billion in bookings by 2027, approximating an adjusted EBITDA margin of around 4% on a full-year basis. This suggests an annual free cash flow conversion of operating profits of over 90% from 2025 to 2027.
Lyft’s Recent Financial Results & Outlook
Lyft’s financial performance for the first quarter significantly outperformed analysts’ predictions. Gross bookings rose by 21% to $3.7 billion, while revenue increased by 28% to $1.28 billion, surpassing estimations of $1.16 billion by 10.02%. Compared to the first quarter of 2023, the net loss reduced drastically from $187.6 million to $31.5 million. Meanwhile the company’s adjusted EBITDA also saw a considerable increase from $22.7 million to $59.4 million. Additionally, the earnings per share (EPS) at $0.15 exceeded the consensus expectations of $0.07.
Looking ahead to the second quarter of 2024, management anticipates its Gross Bookings to be between $4.0 billion and $4.1 billion. The adjusted EBITDA forecast ranges from $95 million to $100 million, representing a predicted adjusted EBITDA margin of approximately 2.4%.
What Is the Price Target for LYFT Stock?
Analysts following the company have taken a cautiously optimistic stance on the stock. Morgan Stanley analyst Brian Nowak recently raised the price target from $17 to $18 while maintaining an Equal Weight rating on the shares. He cites the firm’s guidance for FY24-FY27 Gross Booking CAGR as a positive development. However, it still requires evidence of execution.
Lyft is rated a Moderate Buy based on the recommendations and price targets assigned by 29 analysts over the past three months. The average price target for LYFT stock is $19.34, representing a potential upside of 36.49% from current levels.
The stock is highly volatile, as shares have been trending downward, losing 21% over the past 90 days, and continue to demonstrate negative price momentum, trading below their 20-day (15.51) and 50-day (16.13) moving averages. The stock sits in the middle of its 52-week price range of $8.85 – $20.82 and looks to be significantly undervalued based on a P/S ratio of 1.19x, sitting well below the Software Application industry (its peer group) average of 5.98x.
Concluding Thoughts on Lyft
LYFT has shown remarkable strides in its recent financial performance, beating Q1 estimates and showcasing strong user growth and retention. It has also successfully integrated unique features into its platform, mainly its Women+ Connect initiative.
Furthermore, its optimistic outlook targets $25 billion in bookings by 2027, suggesting an annual free cash flow conversion of over 90% from 2025 to 2027. Although challenges persist, LYFT’s current valuation suggests much of that is priced in, opening the path to a potentially compelling contrarian investment if Lyft can execute its strategy.
