Lyft’s ‘Beacon of Hope’ Quarter Can’t Lift Sinking Sentiment

(Bloomberg) -- Lyft Inc. shares reversed their early gains to trade lower on Thursday, after the ride-hailing company’s beat-and-raise quarter, which prompted one Wall Street analyst to call it “beacon of hope” for the industry, failed to shore up investor sentiment amid a wider trade-related market sell-off.

While some regulatory clouds still hover over the future of the ride-sharing and ride-hailing companies -- tempering some of the investor enthusiasm -- analysts said the results were a step in the right direction in regaining market confidence.

Lyft shares fell as much as 6.7% in New York. Uber declined 7.4%, with the market’s focus now turning to its upcoming earnings on Nov. 4.

Read more: Lyft Third Quarter May Outshine Uber’s as Industry Improves

Here’s a round-up of analyst comments after the results.

RBC, Mark Mahaney

(outperform, PT $82 from $76)

• “We come away from the quarter more constructive on Lyft in part based on strong underlying growth and profitability trends.”
• “Further product innovation along with continued penetration in the enterprise market will likely result in higher engagement from high quality riders.”

Wedbush, Daniel Ives

(outperform, PT $75)

• “Lyft has been under massive pressure since going public as sentiment on the name has been doomsday on the Street with the lack of profitability and credibility of the overall space making valuation a mathematical gymnastics exercise for investors.”
• “Lyft has gotten the message loud and clear from investors as the company has had to accelerate its ability to hit profitability, while gaining share in the domestic ride sharing market and ramping its customer and drive installed base in conjunction, not an easy task.”
• “This quarter was a major step in the right direction towards hitting these goals as we believe despite the uncertainty from the AB5 legislation in California and the glass half empty view of the Street that this stock and valuation has a compelling risk/reward at current levels.”

Evercore ISI, Arndt Ellinghorst

(outperform)

• “Lyft’s second consecutive beat and raise quarter has us dreaming the dream of adjusted Ebitda approaching $1 billion in 2023 coupled with high free cash flow conversion.”
• “More near term, active rider growth came in above our outlook, highlighting resilient U.S. rideshare demand dynamics.”

Guggenheim, Jake Fuller

(buy)

• “A third-quarter beat and another guidance increase should help build comfort in Lyft’s path to profitability.”
• “Results at Lyft are being shaped by a simple theme: Public ownership of Lyft and Uber has led to a more benign competitive backdrop in the U.S. ride hail category.”

MKM, Rohit Kulkarni

(neutral, PT $50 from $45)

• The solid beat and raise of Lyft’s third quarter is a “beacon of hope for ridesharing profitability.”
• “The company has made clear strides along its pathway towards profitability and we think core ride-sharing business could reach Ebitda break-even in 2020.”
• Said the “shares were up ~2% in after-hours trading, implying Lyft remains in a penalty box and the general investor sentiment remains negative.”
• “The Y/Y decline in marketing spend isn’t sustainable over the long-term in Consumer Internet.”

To contact the reporter on this story: Esha Dey in New York at edey@bloomberg.net

To contact the editors responsible for this story: Brad Olesen at bolesen3@bloomberg.net, Will Daley

©2019 Bloomberg L.P.