Lyft (NASDAQ:LYFT) Q3: Beats On Revenue But Stock Drops
Ride sharing service Lyft (NASDAQ: LYFT) beat analysts' expectations in Q3 FY2023, with revenue up 9.8% year on year to $1.16 billion. Turning to EPS, Lyft made a GAAP loss of $0.03 per share, improving from its loss of $1.18 per share in the same quarter last year.
Is now the time to buy Lyft? Find out by accessing our full research report, it's free.
Lyft (LYFT) Q3 FY2023 Highlights:
Revenue: $1.16 billion vs analyst estimates of $1.14 billion (1.3% beat, although Gross Bookings missed)
EPS: -$0.03 vs analyst estimates of -$0.18 ($0.15 beat)
Guidance for Q4 Gross Bookings: $3.65 billion at the midpoint missed expectations of roughly $3.95 billion
Free Cash Flow was -$30.01 million compared to -$112.1 million in the previous quarter (miss vs. expectations)
Gross Margin (GAAP): 44.3%, up from 34.5% in the same quarter last year
Active Riders: 22.4 million, up 2.09 million year on year (slight miss vs. expectations of 22.6 million)
“More drivers and riders are choosing Lyft because we’re following a simple formula: listen to customers and build the experiences they want,” said CEO David Risher.
Founded by Logan Green and John Zimmer as a long-distance intercity carpooling company Zimride, Lyft (NASDAQ: LYFT) operates a ridesharing network in the US and Canada.
Gig Economy
The iPhone changed the world, ushering in the era of the “always-on” internet and “on-demand” services - anything someone could want is just a few taps away. Likewise, the gig economy sprang up in a similar fashion, with a proliferation of tech-enabled freelance labor marketplaces, which work hand and hand with many on demand services. Individuals can now work on demand too. What began with tech enabled platforms that aggregated riders and drivers has expanded over the past decade to include food delivery, groceries, and now even a plumber or graphic designer are all just a few taps away.
Sales Growth
Lyft's revenue growth over the last three years has been strong, averaging 27.7% annually. This quarter, Lyft beat analysts' estimates but reported mediocre 9.8% year-on-year revenue growth.
Ahead of the earnings results, analysts covering the company were projecting sales to grow 9.4% over the next 12 months.
While most things went back to how they were before the pandemic, a few consumer habits fundamentally changed. One founder-led company is benefiting massively from this shift and is set to beat the market for years to come. The business has grown astonishingly fast, with 40%+ free cash flow margins, and its fundamentals are undoubtedly best-in-class. Still, its total addressable market is so big that the company has room to grow many times in size. You can find it on our platform for free.
Usage Growth
As a gig economy marketplace, Lyft generates revenue growth by expanding the number of services on its platform (e.g. rides, deliveries, freelance jobs) and raising the commission fee from each service provided.
Over the last two years, Lyft's users, a key performance metric for the company, grew 17.7% annually to 22.4 million. This is solid growth for a consumer internet company.
In Q3, Lyft added 2.09 million users, translating into 10.3% year-on-year growth.
Key Takeaways from Lyft's Q3 Results
With a market capitalization of $4.18 billion, Lyft is among smaller companies, but its more than $590.5 million in cash on hand and near break-even free cash flow margins puts it in a stable financial position.
Revenue narrowly outperformed Wall Street's estimates but Gross Bookings missed and Active Riders missed by a slight amount. With regards to forward guidance, Q4 Gross Bookings guided was below expectations, although Adjusted EBITDA guidance outperformed Wall Street estimates. Zooming out, we think this was a mixed, quarter. The Gross Bookings guidance could weigh heaviest on the stock. The market was likely expecting more, and the stock is down 6.1% after reporting, trading at $10.07 per share.
So should you invest in Lyft right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.
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The author has no position in any of the stocks mentioned in this report.
