"Surge ride pricing went from $40 to $80-$90 in 20 minutes, then back down to $40 in 40 minutes," Reddit user "chroboseraph3" complained about an airport ride-hail trip, adding that the platform changed over eight drivers within five minutes.
Lyft is planning something new to address riders’ frustration with ridesharing surge pricing, enabling them to pay unlifted rates during busy times.
CEO David Risher said Lyft's new feature, Price Lock, is "something a little crazy" and that Lyft's goal is to "open up a can of whoop ass on primetime," the company's term for surge pricing.
Price Lock will let a rider purchase a monthly subscription for under $5 “that caps the price for a specific route at a specific time,” according to Risher.
Related: Lyft CEO reveals which customers surprisingly tip drivers the best
“Reliable pricing is particularly important to them because they know what their ride should cost and hate it when prices change,” Risher said in the earnings call, “we like the economics of it medium to long term.”
However, Lyft's short-term performance might not be as pleasing. The Price Lock innovation came as Lyft’s second-quarter earnings included weak third-quarter guidance, causing a tumble in Lyft's stock price.
Lyft stock slid despite earnings beat
Lyft's share price lost 17% on the day it released its Q2 financial results despite an earnings beat.
The rideshare company reported revenue of $1.44 billion, beating the estimated $1.39 billion. It earned 24 cents a share, surpassing the forecasted 18 cents and marking its first-ever profitable quarter.
Yet the company's gross bookings and third-quarter guidance is not encouraging.
For the June quarter, Lyft's gross bookings amounted to $4 billion, meeting only the lower end of its forecasted range of $4 billion to $4.1 billion. The company also projects that gross bookings for the September quarter will remain within this same range, but analysts expected around $4.15 billion.
Lyft’s adjusted EBITDA is projected to range between $90 million and $95 million, down from $102.9 million in the second quarter. Analysts had anticipated $103 million. EBITDA means earnings before interest, taxes, depreciation and amortization, a metric used to measure a company's profitability and financial health.
“The guidance is somewhat disappointing. The balance sheet does not do the shares any favor either,” TheStreet Pro's Stephen Guilfoyle commented in an article.
“A $1.603 billion item entered as a current liability that is quite simply labeled as ‘accrued and other current liabilities.’ Kind of hard to thoroughly analyze a balance sheet with a line item under current assets described so vaguely,” Guilfoyle explained.
Lyft stock traded around $10 on August 8 and is down 28% since the beginning of the year, while its bigger rival Uber is up 18%.
Related: Analyst kicks off coverage of Uber amid autonomous vehicle risk
A day before Lyft’s earnings release, Uber posted a solid second-quarter financial result. Uber earned 47 cents per share, higher than the anticipated 31 cents. Revenue reached $10.7 billion, topping the $10.57 billion estimate. Uber stock rose 10% following its earnings.
As of March 2024, Uber accounted for 76% of observed US rideshare spending, while Lyft occupied 24%, according to Bloomberg Second Measure.
Analysts lower Lyft stock price targets
At least 15 analysts have lowered their price target on Lyft stock after earnings.
JPMorgan and TD Cowen both lowered Lyft's price target to $15 from $18 and kept a Neutral and Hold rating, respectively.
JPMorgan’s analyst was concerned about Lyft’s “mixed Q2 results and a light Q3 outlook, with near-term gross bookings pressure driven primarily by faster than expected reduction of Prime Time”.
TD Cowen analysts said Lyft reported solid Q2 results, but its Q3 guidance for EBITDA was below estimates.
More Wall Street Analysts:
- Analysts reboot Amazon stock price targets after earnings
- Analyst reboots Rivian stock price target on updated plans
- Analysts reboot Arm Holdings stock price target following earnings
Wells Fargo lowered Lyft's price target to $12 from $17 and kept an Equal Weight rating. The analyst believes that the market is “overly discounting the value of the network” at the current share price.
Citi analyst Itay Michaeli cited the disappointing earnings but believed that Lyft's risk/reward is improving with estimates resetting and the focus on autonomous vehicles growing. The analyst lowered Lyft’s price target to $10 from $18 and kept a Neutral rating.
"It is not necessarily thesis changing," Michaeli tells investors in a note.
Related: Veteran fund manager sees world of pain coming for stocks
