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Lyft (LYFT) Q2 Loss Narrower Than Expected, Revenues Fall 61%

Zacks Equity Research

Lyft, Inc. LYFT incurred a loss (excluding 55 cents from non-recurring items) of 86 cents per share in second-quarter 2020, narrower than the Zacks Consensus Estimate of a loss of $1.58.

Total revenues of $339.3 million also beat the Zacks Consensus Estimate of $328 million. However, the top line declined approximately 61% year over year due to a fall in Active Riders (riders who take at least one ride during a quarter on Lyft’s multimodal platform through its app) and Revenue per Active Rider. Results reflect a significant downturn in the company’s core ridesharing business, thanks to coronavirus keeping people homebound.

Active Riders declined 60% year over year to 8.69 million in the quarter under review. This San Francisco-based company’s Revenue per Active Rider dipped 2% to $39.06 million.

Adjusted-EBITDA loss for the second quarter was $280.3 million compared with $204.1 million loss incurred a year ago. The adjusted-EBITDA loss margin came in 82.6% compared with 23.5% in second-quarter 2019. Total costs and expenses contracted 46.3% year over year to $826.84 million in the quarter.
 
Contribution deteriorated 70.6% year over year to $117.3 million. Contribution margin fell to 34.6% from 46% a year ago.  Lyft, carrying a Zacks Rank #3 (Hold), exited the second quarter with unrestricted cash (cash and cash equivalents + short-term investments) of $2.77 billion compared with $2.85 billion at the end of 2019. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Outlook

Since the middle of the second quarter, Lyft has been seeing a steady rise in ride volumes. The company’s rideshare rides increased 78% in July from that in April. Through sustained cost-reduction efforts, it expects to generate $300 million of annualized fixed-cost savings by the end of this year. Notably, in April, the company laid off 982 employees, i.e, 17% of its total workforce. Thanks to these cost-cutting measures, Lyft maintains its adjusted EBITDA profitability target for the fourth quarter of 2021 despite 20-25% fewer rides due to coronavirus-led disruptions.

Lyft Raises Alarm on Potential Suspension of Operations in California

During the second-quarter earnings call, management gave a heads up that the company might have to suspend operations in California if it is forced to classify its drivers as employees. Lyft’s rival Uber UBER, which carries a Zacks Rank #3, gave a similar warning. On Aug 10, a California judge granted the state’s request for a preliminary injunction that requires the two companies to categorize their drivers as employees instead of independent contractors. The judge granted a 10-day stay before the injunction goes into effect. In the intervening period, Lyft is expected to appeal the ruling and request for an extension of the stay order. In the event of failure to maintain the independent-contractor status for its drivers, the company might take the drastic step of suspending operations in California.  

Performance of Other Computer & Technology Stocks

Within the broader Computer and Technology sector, AMETEK, Inc. AME and Fitbit, Inc. FIT recently reported earnings numbers.

AMETEK’s second-quarter 2020 adjusted earnings of 84 cents per share beat the Zacks Consensus Estimate of 72 cents. Moreover, net sales of $1,012 million surpassed the Zacks Consensus Estimate of $974.6 million. This stock carries a Zacks Rank #3.

Fitbit, carrying a Zacks Rank #3, incurred a loss of 12 cents in second-quarter 2020, narrower than the Zacks Consensus Estimate of a loss of 21 cents. Total revenues of $261 million missed the Zacks Consensus Estimate of $204 million.

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Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.

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