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Lyft beats Wall Street earnings expectations, analyst says company will recover

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Lyft, the ride share company, announced it beat Wall Street earnings expectations even as ridership remained weak during the pandemic. Wedbush analyst Dan Ives said,"They're gonna be entering the recovery with a much more profitable model."

Video Transcript

SEANA SMITH: We want to talk more about Lyft's earnings, again, the stock here moving a little bit higher after hours, up just around 1%. We want to bring in our co-worker here, colleague Brian Sozzi. And Brian, I understand you were able to speak with a co-founder John Zimmer about these results. What did he have to say?

BRIAN SOZZI: Yeah, I caught up with John Zimmer earlier, Seana and Adam. He told me that he still views Lyft as one of the ultimate recovery stocks, ultimate COVID-19 recovery stocks. In fact, he said, quote, "We are like a coiled spring." And I think what you're seeing in this quote, and why the stock initially went down. I really want to point to two things.

One, they did miss on active riders, perhaps a little bit more than some people were looking for. And then on the press release, too, you had Brian Roberts, who three months ago on the earnings release noted that he expected adjusted operating profits by the fourth quarter of this year. On the earnings release now, he did not reiterate that message.

He did call out a second half recovery. But he didn't mention that profitability measure. So I think all eyes now turn to this conference call to see if he brings that measure back up. But again, at least as far as John Zimmer concerned, he's staying upbeat. He still sees a recovery later this year as more people get vaccinated.

SEANA SMITH: All right, Brian Sozzi, thanks so much. For more on this, we want to bring in Dan Ives of Wedbush Securities. And Dan, we went over all these results. You just heard what Brian Sozzi had to say, that miss on active riders, the fact that we didn't hear adjusted operating profits mentioned in this earnings release. What are your initial thoughts on the numbers that we just got?

DAN IVES: A step in the right direction. This continues core recovery play for other side of the dark valley, especially with the vaccine being deployed and a more profitable model. And I think this is really what investors are really going to look past this quarter going into the rest of the year.

And if I look at just the profitability profile combined with what we're seeing a rebound in ride sharing, this continues to be a 1, 2 punch in terms of recovering names along with Uber. And that's what the Street's going to continue to focus on and ultimately bullish on.

ADAM SHAPIRO: Dan, in fact, the Street right now, I mean, the shares in the aftermarket are trading just a little bit higher. They're up about, I believe, almost 2%.

Let me ask you this, though, because they were such a darling before the pandemic, this metric that they threw at us, that they eliminated $360 million in fixed costs on an annualized basis, and that's over the original 2020 plan. I know we all look at the ridership and the revenue number. That's a pretty big number that they just threw there that a lot of investors might miss.

DAN IVES: Well that's the huge part right now, is that they're going to be entering the recovery with a much more profitable model, as they've cut out so many of these fixed costs, as well as Prop 22 in the rearview mirror. That sort of the combination why right now Lyft and Uber, these stocks continue to move higher, in my opinion, on the ride sharing, more and more looking for recovery plays.

And their back was against the wall. And they've done everything step by step, but also communicated it to the Street. I think Lyft and Uber have done great jobs there. And that's why I continue to view this, it's a feather in the cap for the bulls.

BRIAN SOZZI: Dan, you know, it's funny you mentioned the cost component, because they did not in the earnings release that they have cut more than $300 million in annualized fixed costs in the fourth quarter. That's 20% ahead of their budget. Zimmer did tell me they have more room to cut. My question is, where are they cutting these costs? And do these costs come back into the business as more people ride and things get back to normal?

DAN IVES: Yeah, Brian, I also think there's a lot of leverage in the model. And I think in terms of the cost cutting, a lot of it is really they had some other initiatives around autonomous and other areas that they've cut. And I think if you look at it, they've had to rationalize the cost structure. And that's the key. And that's why many, as others have talked about, why these stocks doubled from from the bottom.

And I think it continues to be they've cut costs, they've navigated, of course, Uber has food delivery. That continues to be a huge growth area. But when you look at Lyft and Uber, these are recovery names. And that's the key.

SEANA SMITH: Well, Dan, speaking of Uber, after we just got these results from Lyft, what do you think we can expect from Uber after the bell tomorrow?

DAN IVES: It's going to be the same store. And Dara, you've got to give him and the team all the credit. They've doubled down on food delivery. And you look with everything we're seeing with Postmates, Drizly, and others, I think that's worth $15, $20 per share of the stock. And food delivery was the anchor on the ship. Now it's a major asset. They've doubled down, cut costs, focused on profitability.

It's been a huge, I think, achievement for Dara and the team, everything they did with their back against the wall, coming out of the IPO, the haters were out there, pandemic hits, and now look what's happened. I think they're on the other side of this.

SEANA SMITH: All right, Dan Ives of Wedbush, always great to speak with you.

DAN IVES: Thank you.

SEANA SMITH: Thanks so much for jumping on with us here today, and of course, our thanks to Brian Sozzi as well.