| Author | Message | ||
     Entrepreneur Kurra Bewarse Username: Entrepreneur Post Number: 3332 Registered: 05-2011 Posted From: 65.35.45.47 Rating: N/A |
Lyft riding higher as update points to possible U-turn ahead for rideshare business (59.17 +2.11) When Lyft (LYFT) reported 4Q20 results on February 9, CEO and Co-Founder Logan Green characterized the ridesharing company as a "tightly coiled spring" that's poised to generate strong growth and margin expansion. After the company raised its 1Q21 adjusted EBITDA guidance last night, it appears that the spring is about to be sprung as more business restrictions are lifted and as vaccines are distributed. LYFT now believes it can manage its 1Q21 adjusted EBITDA loss to $135 mln vs. its prior outlook of $145-150 mln. While aggressive cost cutting measures are the main driver behind the improved profitability, we believe that the encouraging trends in the rideshare market are carrying more weight with investors. Underscoring that premise, we note that shares of Uber (UBER) are also rallying on LYFT's update. The recovery occurring in the rideshare market has been subtle and gradual but also meaningful and potentially foretelling of a stronger upturn in the near future. Momentum began building in February; ridership in the last week of the month hit the highest level since March 2020. What's especially promising is that average daily rideshare for the entire month was up 4% compared to January, despite the fact that severe weather ravaged several states, including Texas, during the month. LYFT expects this push to continue, predicting that rideshare volume beginning the week ending March 21, 2021 will show positive yr/yr growth. Also, LYFT's expectation for this growth trend to continue throughout the remainder of the year suggests that the rideshare market may have just reached a key turning point. The "tightly coiled spring" then comes into play because LYFT is emerging from the pandemic as a much leaner company. In Q4, the company cut fixed costs by $360 mln on an annualized basis, with an emphasis on lowering driver acquisition costs. Furthermore, LYFT slashed operating expenses by over $200 mln, with declines seen across sales and marketing, operations and support, and R&D. As rideshare demand picks up steam, margins are set to expand considerably due to the lower cost structure. In turn, adjusted EBITDA profitability by the end of this year seems very attainable. In fact, during the Q4 earnings call, CFO Brian Roberts commented that profitability on an adjusted EBITDA basis may be possible in Q3 if the rideshare market experiences a robust recovery during the summer. LYFT's update and improved outlook has the feel of a prime event in its recovery journey. Business conditions are still far from optimal, but there's a sense that the tipping point is near. Barring an unforeseen setback with vaccines or the economy, LYFT is on the verge of a major financial turnaround due to the combination of cost cuts and improving rideshare demand. |