We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Lyft Stock Down 38% in 6 Months:Thinking of Buying the Dip?
Read MoreHide Full Article
Shares of ride-hailing company Lyft (LYFT - Free Report) have not had a good time on the bourses of late, plunging 37.7% over the past six months. The disappointing price performance resulted in LYFT underperforming its industry as well as rival Uber Technologies (UBER - Free Report) in the same timeframe.
Six-Month Price Comparison Image Source: Zacks Investment Research
Currently trading at $11.25, the stock rebounded 27% from its 52-week low of $8.85. However, it still reflects a discount of 85% from its 52-week high of $20.82 reached on Mar 21.
In fact, LYFT shares have plummeted 74% over the past five years.
LYFT stock is trading below its 200-day moving average, indicating potential weakness in the stock's momentum.
Image Source: Zacks Investment Research
Given the significant pullback in LYFT’s shares currently, investors might be tempted to snap up the stock. But is this the right time to buy LYFT stock? Let’s find out.
LYFT is Cutting Costs for Bottom-Line Growth
In a bid to improve its price performance, LYFT is looking to reduce costs and improve efficiencies. To this end, on Sept. 4, LYFT announced a restructuring plan pertaining to its bikes and scooters operations. As part of the plan, the company aims to dispose of certain assets from the concerned operations.
As a result, approximately 1% of LYFT’s employees will be laid off. Lyft estimates that it will incur approximately $34 million to $46 million of restructuring and related charges, of which $32-$42 million are related to asset disposal costs and the remainder pertains to employee severance and benefit costs and advisory fees. The company expects that the charges (most of which will be non-cash in nature) will be incurred primarily in the third quarter of 2024 and that these charges will be substantially completed by the end of the year.
LYFT expects the restructuring plan and related actions to improve its annualized adjusted EBITDA by approximately $20 million by the end of 2025. The improvement will primarily come from headcount reduction savings, operational efficiencies and commercial strategy enhancements.
To counter economic uncertainties, LYFT had trimmed its workforce previously, too, to reduce costs. We remind investors that in September 2022, Lyft announced its decision to stop hiring employees through 2022-end.
LYFT’s High Debt Load : A Concern
We are also concerned about LYFT’s high debt levels, despite efforts to reduce the same. The company’s times interest earned ratio was negative 0.9 at the end of the second quarter of 2024. A negative times interest earned ratio often means that a company's current income is not sufficient to cover its interest expenses. This implies serious financial problems.
Long-Term Debt to Capitalization
Image Source: Zacks Investment Research
Improving Rideshare Market: A Silver Lining
Lyft is benefiting from an uptick in driver supply. Highlighting the improvement in the ride share market, active riders increased in all four quarters of 2023. Continuing the trend, in second-quarter 2024, active riders increased 10% year over year to 23.7 million. Gross bookings reported for the quarter were $4 billion, marking a year-over-year increase of 17%.
Expecting growth in rides to continue for the third quarter of 2024, LYFT expects gross bookings in the range of $4-$4.1 billion, which reflects year-over-year growth of 16-19%. Adjusted EBITDA margin (calculated as a percentage of gross bookings) is expected to be around 2.3%. For 2024, Lyft continues to anticipate rides growth in the mid-teens year over year. Adjusted EBITDA margin (calculated as a percentage of gross bookings) is expected to be around 2.1%.
LYFT Trading at a Discount
From a valuation perspective, LYFT is trading relatively cheaply. LYFT is currently trading at a forward sales multiple of 0.76, below its median of 2.32 over the last five years and also at a discount compared with the broader industry. The reading also compares favorably to another industry player, DoorDash (DASH - Free Report) .
Image Source: Zacks Investment Research
End Call
LYFT is attractively valued, and the improvement in the rideshare market serves it well, but one should be mindful of the economic challenges that have resulted in its disappointing price performance. To combat the headwinds, LYFT is restructuring its operations and cutting costs. Financial problems highlighted by its negative times interest earned ratio is another challenge. Considering all this, we believe that it is not at all advisable to buy this Zacks Rank #3 (Hold) stock until the company demonstrates substantial improvement in its performance. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
We believe investors should monitor the company’s developments closely for an appropriate entry point. For those who already own the stock, it will be prudent to stay invested. The stock’s Zacks Rank supports our thesis.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Lyft Stock Down 38% in 6 Months:Thinking of Buying the Dip?
Shares of ride-hailing company Lyft (LYFT - Free Report) have not had a good time on the bourses of late, plunging 37.7% over the past six months. The disappointing price performance resulted in LYFT underperforming its industry as well as rival Uber Technologies (UBER - Free Report) in the same timeframe.
Six-Month Price Comparison
Image Source: Zacks Investment Research
Currently trading at $11.25, the stock rebounded 27% from its 52-week low of $8.85. However, it still reflects a discount of 85% from its 52-week high of $20.82 reached on Mar 21.
In fact, LYFT shares have plummeted 74% over the past five years.
LYFT stock is trading below its 200-day moving average, indicating potential weakness in the stock's momentum.
Given the significant pullback in LYFT’s shares currently, investors might be tempted to snap up the stock. But is this the right time to buy LYFT stock? Let’s find out.
LYFT is Cutting Costs for Bottom-Line Growth
In a bid to improve its price performance, LYFT is looking to reduce costs and improve efficiencies. To this end, on Sept. 4, LYFT announced a restructuring plan pertaining to its bikes and scooters operations. As part of the plan, the company aims to dispose of certain assets from the concerned operations.
As a result, approximately 1% of LYFT’s employees will be laid off. Lyft estimates that it will incur approximately $34 million to $46 million of restructuring and related charges, of which $32-$42 million are related to asset disposal costs and the remainder pertains to employee severance and benefit costs and advisory fees. The company expects that the charges (most of which will be non-cash in nature) will be incurred primarily in the third quarter of 2024 and that these charges will be substantially completed by the end of the year.
LYFT expects the restructuring plan and related actions to improve its annualized adjusted EBITDA by approximately $20 million by the end of 2025. The improvement will primarily come from headcount reduction savings, operational efficiencies and commercial strategy enhancements.
To counter economic uncertainties, LYFT had trimmed its workforce previously, too, to reduce costs. We remind investors that in September 2022, Lyft announced its decision to stop hiring employees through 2022-end.
LYFT’s High Debt Load : A Concern
We are also concerned about LYFT’s high debt levels, despite efforts to reduce the same. The company’s times interest earned ratio was negative 0.9 at the end of the second quarter of 2024. A negative times interest earned ratio often means that a company's current income is not sufficient to cover its interest expenses. This implies serious financial problems.
Long-Term Debt to Capitalization
Improving Rideshare Market: A Silver Lining
Lyft is benefiting from an uptick in driver supply. Highlighting the improvement in the ride share market, active riders increased in all four quarters of 2023. Continuing the trend, in second-quarter 2024, active riders increased 10% year over year to 23.7 million. Gross bookings reported for the quarter were $4 billion, marking a year-over-year increase of 17%.
Expecting growth in rides to continue for the third quarter of 2024, LYFT expects gross bookings in the range of $4-$4.1 billion, which reflects year-over-year growth of 16-19%. Adjusted EBITDA margin (calculated as a percentage of gross bookings) is expected to be around 2.3%. For 2024, Lyft continues to anticipate rides growth in the mid-teens year over year. Adjusted EBITDA margin (calculated as a percentage of gross bookings) is expected to be around 2.1%.
LYFT Trading at a Discount
From a valuation perspective, LYFT is trading relatively cheaply. LYFT is currently trading at a forward sales multiple of 0.76, below its median of 2.32 over the last five years and also at a discount compared with the broader industry. The reading also compares favorably to another industry player, DoorDash (DASH - Free Report) .
End Call
LYFT is attractively valued, and the improvement in the rideshare market serves it well, but one should be mindful of the economic challenges that have resulted in its disappointing price performance. To combat the headwinds, LYFT is restructuring its operations and cutting costs. Financial problems highlighted by its negative times interest earned ratio is another challenge. Considering all this, we believe that it is not at all advisable to buy this Zacks Rank #3 (Hold) stock until the company demonstrates substantial improvement in its performance. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
We believe investors should monitor the company’s developments closely for an appropriate entry point. For those who already own the stock, it will be prudent to stay invested. The stock’s Zacks Rank supports our thesis.