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Lyft is one of the best COVID-19 recovery stocks: co-founder

Lyft shares extended gains on Wednesday following better-than-expected third-quarter results. Lyft co-founder and President John Zimmer reiterated the company’s profitability goal in an interview with Yahoo Finance’s Editor-at-Large Brian Sozzi on Tuesday prior to the company’s earnings release, adding that Lyft was “one of the best recovery stocks there is” and vaccines will further accelerate its recovery.

Video Transcript

JULIE HYMAN: A couple of companies out with earnings. Let's start with Lyft, the rideshare company, coming out with numbers after the close of trading yesterday. And the overall theme, Brian Sozzi, seems to be things are still very bad year-over-year, but getting better quarter-over-quarter as this year has gone on.

BRIAN SOZZI: You nailed that one, Julie. And that was the theme on the phone when I talked to Lyft co-founder John Zimmer. In fact, he actually took me by surprise by saying Lyft is one of the best recovery stocks around. So it was interesting to hear him say that.

But importantly here, the growth rates quarter-over-quarter in terms of rides, up 44%. That is very important. It looks like they are still maybe running a little bit worse this quarter because of the rise in infections.

But importantly here, and what I see a lot of people on the street focusing on right now, they pushed up some of their profit goals. They still expect to be profitable in the fourth quarter or 2021. But they plan to get there in large part, Zimmer tells me, by cutting $300 million in expenses by the fourth quarter.

A lot of expenses to come out of this model. It has a lot of people on the street very optimistic. Also, they teased a delivery business. I don't think they'll be getting into a delivery business like Uber, but they teased it. So I'll be curious to see how that unfolds.

MYLES UDLAND: Well, Sozzi, I wanted to ask about the delivery business, because the Uber story has become very strange to me. The Eats business is growing quite a bit, but it has horrend-- horrific margins. I wouldn't even call them horrendous. They're worse than that.

The Rides business for Uber is actually profitable. And I think Lyft can maybe benefit from being more of a pure play ridesharing type business. I mean, I understand it's kind of the flavor of the year here or whatever. But it's interesting to see Lyft talk so much about that on the call the way they did, essentially teasing that they might do an acquisition, because I know everyone and their mother has a Fantasy Football acquisition for them.

BRIAN SOZZI: Yeah, well, Myles, Lyft essentially gets high marks on the street for its focus and discipline. That really reflects their DNA-- scrappy start-up really competing against Uber. But it will be a focused delivery business. Again, details are scarce, but more local business-to-business transactions. They don't want to create a marketplace like Uber has done.

JULIE HYMAN: Yeah, it has been very interesting, to your point, Myles, to see sentiment shift on Uber's business model. It's good to be diversified. It's not going to be diversified. It's going to be international. It's not. So we'll see where that ends up.