Lyft beats earnings estimates; co-founder says it's one of the best COVID-19 recovery stocks
Lyft (LYFT) co-founder and President John Zimmer says his ride-sharing business is fighting like hell to overcome the effects of the COVID-19 pandemic on human mobility.
The hoped-for-goal from that fight: finally reaching profitability by the fourth quarter of 2021, a goal Lyft has been pointing to consistently throughout the challenging 2020 backdrop. Zimmer reiterated that goal in an interview with Yahoo Finance Tuesday prior to the company’s quarterly earnings release after market close on Tuesday.
Here’s how Lyft performed versus Wall Street estimates compiled by Bloomberg:
Net Sales: $499.7 million versus estimates for $486.5 million’
Active Riders: 12.5 million versus estimates for 12.8 million
Adjusted EBITDA Loss: $239.7 million versus estimates for $252.2 million
Diluted Loss Per Share: $0.89 a share loss versus estimates for a $0.91 loss
Zimmer pointed to some $300 million in fresh cost savings by the end of the current quarter as a key driver to profitability.
“Some of the headwinds are now tailwinds after most of the year with the wind in our face — it's now at our back. And we are one of the best recovery stocks there is, and vaccines will further accelerate our recovery,” Zimmer said.
The company’s third quarter active riders rose 44% sequentially to 12.5 million as states opened back up from quarantine. Revenue increased 47% from the second quarter to $499.7 million. Improvements in each metric is not too unlike what rival Uber saw in its third quarter shared last week.
Zimmer added, “The recovery is real. The fundamentals are strong.”
With COVID-19 infections back on the rise nationwide, it may take another quarter of sequential growth in Lyft’s active riders and further profit progress to lure more bulls into the story. In other words, the ride-sharing industry has to show it can continue to recover and march towards profitability in 2021 even as states reimpose restraints on human activity.
The new Lyft bulls would be joining a large crowd that have assembled in the market for Lyft’s stock in the hopes of a COVID-19 vaccine sending people back out and about soon.
Lyft’s stock is up 33% in the past month, also reflecting a boost from the passing of Prop 22 in California.
“We could see more bumps on the way to a full recovery, but long-term investors could still benefit from valuation of 3.9x NTM EV/S (3.0x CY21) being well below pre-COVID peak levels of 6-7x,” said Jefferies analyst Brent Thill.
Zimmer remains hopeful on life getting back to some form of normal once COVID-19 vaccines are released.
Transportation is not going away. People are going to move around. I think there's going to then hopefully be this renaissance of people wanting to do things, be creative, get around,” Zimmer added.
Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
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