Lyft loses $1.1 billion in market value as stock plunges to lowest after analyst downgrades

Analysts on Tuesday hailed Uber Technologies Inc. as their preference for ridesharing as Lyft Inc. reported quarterly results indicating it was feeling some pressure from its biggest rival, sending Lyft shares to a low. record level.

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The stock, which had fallen 20% in premarket trading, closed Tuesday at an all-time low of $10.90, down nearly 23%. The company has lost $1.169 billion in market capitalization and its shares, which have fallen nearly 75% year-to-date, are on track for their worst year on record.

The ride-sharing company released mixed third-quarter results on Monday afternoon, which showed disappointing customer numbers even as Lyft benefited from price trends. Lyft’s results disappointed investors and analysts as at least one on Wall Street downgraded its rating.

“We would much rather own UBER, given its superior size and business model and [geographic] diversification,” wrote an Evercore ISI team led by Mark Mahaney. “Hence the downgrade.”

Evercore analysts significantly reduced their price target on Lyft from $41 to $18 per share and lowered their rating to outperform.

Mahaney worried about a 1% market share loss for Uber and the “real potential” of declining consumer demand in 2023, though that’s not quite the case yet. Still, the latest customer-related trends have disappointed him.

“We believed the company’s substantial exposure to West Coast markets and shared rides would drive a strong recovery in passengers and revenue in [the second half of 2022],” he wrote. “It may still happen and there may just be a delay here, but the particularly weak growth of Active Riders in the third quarter…we are very concerned.”

The company added 452,000 active passengers in the quarter compared to 2.1 million in the second quarter and 1.8 million in the third quarter, Mahaney noted.

Lyft stock drops due to growth issues. Uber casts a shadow over its rival.

JPMorgan analysts agree. They said they still preferred Uber, but could see an attractive risk-reward balance in Lyft stock “if the company can show progress toward its 2024 goals.”

Those 2024 targets include adjusted earnings before interest, tax, depreciation and amortization (Ebitda) of $1 billion. Lyft also met its free cash flow target of at least $700 million.

Lyft executives told analysts that even in the face of a recession, they were confident they would meet their targets because rising unemployment would encourage people to drive for Lyft.

But JP Morgan’s Doug Anmuth said Lyft’s actions are more of a “show me” story. They think Lyft will likely hit its Ebitda margins, but “investors will likely be more mixed.”

Bernstein analysts were also in “wait-and-see” mode on Lyft’s Ebitda target.

“Rising insurance costs and weaker than expected rider growth are weighing on sentiment as the Ebitda growth driver mix is ​​less supportive,” the team led by Nikhil Devnani said.

RBC Capital Markets’ Brad Erickson pointed out that Uber’s actions appear to be putting pressure on Lyft.

Lyft management mentioned that Uber temporarily spent more on driver incentives in the quarter, although Uber appears to have backtracked on those. Either way, for Erickson, the disclosure “illustrates the point” that Uber can use its larger, more diverse income statement “to disrupt Lyft’s share without discernible impact on UBER’s profitability and we think [this] could easily remain an ongoing problem for LYFT in the future,” he wrote.

It retained its sector performance rating on the stock and a price target of $16 due to Lyft’s “structural competitive disadvantage” over Uber.

However, DA Davidson’s Tom White widely praised the company’s efforts with its customer base – what it calls active runners – and reaffirmed its Buy rating, but lowered its price target from $19 to $25 per share.

Lyft’s active rider count was up 7% from the same time in 2021, but below Wall Street estimates.

“While we have some concerns about the pace and magnitude of Lyft’s broader post-pandemic revenue recovery, the company has done a solid job monetizing its Active Rider base over the past few quarters,” a- he writes.

This story has been updated with Lyft’s closing price and other information.

Earnest L. Veasey