Updates to add CEO quotes from interview, context on drivers
The Soaring Forecast
Lyft’s Class A shares (NASDAQ:LYFT) skyrocketed in extended trading on Tuesday, following the ride-hailing firm’s announcement that it is expected to generate positive free cash flow for the entire year for the first time. The stock surged as much as 66.9% post-market and showed a 15.8% increase, reaching $13.70. Notably, LYFT has a 13.74% short interest with 47.71M shares out of a public float of 332.63M shares.
Market Context
The company’s latest forecast comes shortly after its larger competitor, Uber (UBER), reported its first profitable year. The solid results from both market leaders indicate that there is continued strong demand for ride-sharing, despite concerns over regulatory scrutiny and driver compensation.
In the fourth quarter of 2023, Lyft’s net loss narrowed to $26.3M from a net loss of $588.1M a year ago. Its revenue also saw a 4% year-over-year increase to $1.2B, aided by a 17% rise in gross bookings to $3.7B. Lyft recorded 191M rides during Q4, marking its fourth consecutive quarter of growth, and had 22.4M active riders. The total rides for the year 2023 reached 709M, reflecting an 18% year-over-year increase.
Market Response and Driver Dynamics
Lyft’s results come just before a planned strike by drivers represented by Justice for App Workers, involving over 130K ride-share drivers and delivery workers. The drivers are expressing concerns about fair wages, safety, and more and are set to boycott rides to and from major airports in 10 cities.
Last week, Lyft addressed complaints about pay transparency by announcing that its drivers would receive at least 70% of rider fares each week after the deduction of external fees. In response to the upcoming strike, Lyft CEO David Risher told Seeking Alpha in an interview, “It’s hard to predict where that goes, we’re actually responding to many of their requests ourselves.”
CEO’s Commentary and Financial Projections
Risher highlighted the drivers’ desire for transparency and fair earnings. He mentioned that over the second half of last year, the company paid its drivers $30.68 gross per hour for engaged time. Looking ahead, for the first quarter of 2024, Lyft expects gross bookings of about $3.5B to $3.6B and adjusted EBITDA of $50M to $55M.
However, the highlight was Lyft’s projection for the full year 2024. The company anticipates generating positive free cash flow for the entire year, supported by a forecast of rides growth in the mid-teens, slightly faster than the rides growth for gross bookings, and an expected adjusted EBITDA margin expansion of about 50 basis points. This development would mark a significant milestone for the company.
Projections and Focus Areas
When asked about the timeline for achieving profitability, Risher asserted that profitability is a focus for the company. Additionally, he emphasized the significance of becoming free cash flow positive for the entire year of 2024 as a clear indication of the company’s financial strength.
Correction from source: LYFT has corrected its press release to say “50 basis points” as part of its full year adjusted EBITDA margin guidance instead of “500 basis points.” This story has been amended to reflect that correction.