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Here's Why You Should Grab Lyft (LYFT) Stock Right Now

Zacks Equity Research

Ever since going public on Mar 29, 2019, Lyft, Inc. LYFT has been gaining traction on the back of solid growth in Active Riders. This, in turn, is driving the top line. Evidently, the company’s top line soared 74.8% in the first nine months of 2019 owing to significant growth in Revenue per Active Rider (increased 21.7%, 33.9% and 27% in the first, second and the third quarter of 2019, respectively).

Anticipating consistent uptrend in rider growth, the company expects revenues between $975 million and $985 million in the fourth quarter, indicating a surge of 46-47% from the year-ago reported figure. The buoyancy in the stock is further highlighted by the company raising its view for 2019 revenues for the second time during the third quarter. It expects revenues of $3.57-$3.58 billion for the current year, implying an approximate 66% rise from the prior-year reported number (previous view: $3.47-$3.50 billion). We remind investors that the company had earlier lifted its 2019 revenue guidance during the second-quarter earnings release.

Additionally, the company’s focus on profitability instead of scale is encouraging. With this goal in sight, Lyft’s adjusted EBITDA loss in the third quarter improved to $128.1 million compared with a loss of $263.2 million incurred a year ago. Moreover, the same for the current quarter is now anticipated to be $160-$170 million (loss of $251 million reported in the year-ago period), better than a loss of $240-$245 million expected previously. For 2019, adjusted EBITDA loss is forecast in the band of $708-$718 million, suggesting an improvement from the prior outlook of $850-$875 million. To top it all, the company expects to earn profits in terms of Adjusted EBITDA during the fourth quarter of 2021, a year ahead of what market watchers had previously anticipated.

With the market for driverless or self-driving cars gaining momentum, Lyft aims to become a key player in this space. To this end, on Jun 27, Lyft announced that it has entered into a partnership with Waymo, a subsidiary of Alphabet. Following the deal, some Lyft users in the Phoenix area are able to take an autonomous ride, powered by Waymo. Notably, Waymo provided 10 self-driving minivans to Lyft for use in specific areas of Phoenix.

Further, Lyft was included in the Russell 1000 Index following the completion of FTSE Russell Indexes’ annual reconstitution on Jun 28. The inclusion of the stock in this highly sought-after index, which tracks the 1,000 largest companies in the United States, is likely to offer some advantages to Lyft. Russell Indexes are widely used by institutional investors and investment managers not only for index funds but also as benchmarks for prudent investment strategies. Following the inclusion, index funds that track the Russell benchmarks need to buy Lyft’s shares in excess of worth $90 million. Such prolific investments bode well for the stock’s liquidity position.

These positives are aptly justified by the company’s Zacks Rank #2 (Buy). Therefore, we believe that investors should add Lyft to their portfolios right now.

Other Key Picks

Some other top-ranked stocks in the same space are HealthStream, Inc. HSTM, Marchex, Inc. MCHX and Akamai Technologies, Inc. AKAM. While HealthStream and Marchex sport a Zacks Rank #1 (Strong Buy), Akamai Technologies carries a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of HealthStream, Marchex and Akamai Technologies have rallied more than 18%, 53% and 43%, respectively, so far this year.

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