Lyft, Inc. (LYFT) had a lumpy post-market trade after announcing a shift in its post IPO lockup policy during its earnings on Wednesday evening, but a clearer path to profitability ahead is buoying bullishness into Thursday's trading.
Shares of the San Francisco-based ride sharing company were up about about 3% Thursday morning after touching significantly higher levels immediately after the market open.
The still positive move comes after the company said its loss for the three months ending in June was tabbed at 68 cents per share, notably lower than the staggering $8.37 per share loss it booked last year and significantly better than consensus estimates. The company revenues also cruised past consensus for the quarter, marking a 72% increase year over year to $867.3 million.
"We're excited about our strong performance this quarter, built on incredible effort across all of our teams," CEO Logan Green told investors on a conference call late Wednesday. "Our 72% revenue growth rate this quarter is exceptional at our scale. We are increasingly confident in the market outlook for U.S. ridesharing as the competitive environment continues to show signs of improvement."
Looking into 2019, Lyft said it sees full year revenues in the range of $3.47 billion to $3.5 billion, up from a previous forecast of $3.28 billion to $3.3 billion. The ride-hailing group also lowered its adjusted loss forecast for the year to between $850 million and $875 million, down from its prior estimate of $1.15 billion to $1.18 billion.
Revenue per rider also improved 22% in the quarter, suggesting that the price war with Uber (UBER) may be reaching an armistice and a more profitable duopoly may finally be forming.
"The number of Active Riders grew 41% year-over-year to 21.8 million, while revenue per Active Rider grew 22% year-over-year," Green told analysts. "As a result of our strong top line growth and an improving market environment, we generated significant operating leverage. This was a milestone quarter on our path to profitability."
The steps on the path to profitability is key to getting the market on board with the heavy-loss making companies that had been severely punished for their cash burning habits. Among many major analysts, the company is garnering a larger degree of credibility.
"We are upgrading LYFT shares to "Outperform" from "Neutral" after Lyft exhibited in 2Q19 many of the indicators we had been looking for to get more positive on the story," Wedbush analyst Dan Ives said. "Lyft reported better than expected active riders, revenue per active rider, ridership, and profitability which was a major step in the right direction in our opinion towards gaining much needed Street credibility."
Lock Up Uproar
The main concern post-market that led to a volatile initial share reaction was the move up of the company's lockup on nearly 260 million insider shares from September 24 to August 19.
"The lock-up period is scheduled to end on September 24, 2019, which falls within the Company's quarterly blackout period that commences at the end of the day on August 31, 2019," a regulatory filing states. "Therefore, in accordance with the lock-up agreements with the underwriters, the lock-up period will end at the open of trading on August 19, 2019, which is ten trading days prior to the commencement of the Company's quarterly blackout period."
$LYFT is gonna go red on this garbage announcement. Uber surely to follow.
— Conor Sen (@conorsen) August 7, 2019
Initially, the reaction was largely negative, taking the post-market pop of nearly 12% quickly to a nearly 3% loss in a matter of just 15 minutes prior to the company's earnings conference call.
After the call and into early morning hours on Thursday, the strong results appear to have overshadowed some of the initial shock at the announcement, with many analysts even advising the earlier expiration is a good thing.
"While the revised timing likely creates more tactical considerations over the next several trading days, we view the earlier expiration as a positive as it more quickly moves Lyft beyond a key overhang," J.P. Morgan analyst Doug Anmuth said. "Lyft also noted that co-founders Logan Green & John Zimmer, along with CFO Brian Roberts, who collectively own ~5-6% of shares, will not be selling at the lock-up expiration."
He added that the secular story for "Transportation as a Service" (TaaS) is much more important for investors to be mindful of than short term tactics.
"Our bull thesis is driven by the company's significant market opportunity, its history of innovation, and its path to profitability as the business scales." Anmuth said. "We reiterate our "overweight" rating and are raising our price target to $90."
He is hardly alone, with 75% of analysts polled by FactSet after the earnings release raising price targets and all but one advising a "Buy" rating amid the remaining noise.
The results will certainly put the pressure on Uber to deliver on Thursday evening to confirm the firmer duopoly dynamics in ridesharing.
