Lyft Rides Reach New High Since April; RBC ‘Patiently Optimistic’

Lyft (LYFT) has revealed that in the week ended September 6, 2020, rideshare rides reached a new high since April as the change in rideshare rides recovered to less than a 50% year-over-year decline.

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In the first two months of the third quarter, rides on Lyft’s rideshare platform were down 53.6% versus the same period a year ago. Rideshare rides in the month of August 2020 increased 7.3% versus July 2020 and were down 53.0% versus the same period a year ago.

While local recovery trends continue to vary significantly, Lyft stated that its Canada rideshare operations have recovered more quickly than in the US. For example, in the week ended September 6, 2020, rideshare rides were down less than 20% year-over-year in Toronto, while weekly rides in Vancouver reached a record all-time high.

In August, Lyft used a lower amount of driver incentives than originally anticipated as more drivers returned to the platform, improving supply conditions on the its rideshare marketplace.

“While trends in driver supply vary significantly between individual cities, the Company expects that lower driver incentives spend will result in a more favorable relationship between revenue and rideshare rides in the third quarter than previously expected” Lyft stated.

Based on this improved outlook, Lyft now expects that the year-over-year change in revenue will modestly outperform the year-over-year change in rideshare rides in the third quarter.

And LYFT continues to expect Q3 Adjusted EBITDA loss below $265 million if driver incentives spend and average daily rideshare ride volume in September match August 2020 levels. This includes the $17.55M in policy spend related to Proposition 22 in California. (See Lyft stock analysis on TipRanks)

Following the update, RBC Capital analyst Mark Mahaney reiterated his buy rating on LYFT with a $48 price target. He sees Q3 RBC/Street Revenue estimates, which call for -50%/-48% Y/Y, as achievable with modest upside, given Rides commentary and the low driver incentive environment.

According to Mahaney, Lyft provides a great recovery play and re-rating opportunity once conditions normalize. “We remain patiently optimistic” says the analyst, adding “it’s not a question of IF, but rather WHEN.”

Shares in Lyft have plunged 30% year-to-date, and the stock scores a relatively positive Moderate Buy Street consensus. Meanwhile the average analyst price target of $42 indicates upside potential of over 40%.