Lyft Lowers Growth Outlook After Rides Plunge in November

Lyft Inc. lowered its outlook for fourth-quarter growth after demand for rides plunged 50% in November due to a resurgence in Covid-19 cases across the U.S.

As a result of the uptick in cases and the reintroduction of restrictive measures designed to curtail the spread of the coronavirus in some cities, Lyft said it now expects sequential revenue growth will be at the low end of the 11% to 15% range it had predicted last month.

At the same time, the company said its adjusted loss, which excludes interest, taxes and other expenses, will be narrower than $185 million, better than a previous forecast of $190 million to $200 million. Lyft said the improvement is due to a better contribution margin, which is the part of sales excluding costs, as well as strong “cost controls given the unpredictable market environment.”

The company expects to see its contribution margin continue to expand next year, even before a full recovery. Lyft’s shares were up 1.2% at 10:10 a.m. in New York.

The outlook, published in a filing to the U.S. Securities and Exchange Commission Wednesday, was a turnaround from a more upbeat report just a month ago. In the third quarter, sales surged by almost half from the previous period, and co-founder John Zimmer sounded an optimistic note about the promise of a vaccine bringing the pandemic to a close.

Lyft was particularly unprepared for a global pandemic. Uber Technologies Inc., its largest competitor, has a growing food-delivery business that has helped offset steep declines in ridership. Lyft doesn’t have a standalone consumer delivery operation, though the company has struck partnerships to deliver food via Grubhub and provide non-emergency medical transportation for riders through electronic health record provider Epic Systems Corp.

Despite tempered expectations for revenue growth, recent cost cuts could help keep cash burn in check, said Bloomberg Intelligence analyst Mandeep Singh. The company “will likely focus on offsetting a decline in ride volume by expanding food delivery through its partnership with Grubhub and possibly in grocery by forming alliances with large retail chains.”

©2020 Bloomberg L.P.

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