While the outlook for Lyft this year isn't quite as good as a typo in its earnings release originally indicated, Wall Street still liked what it saw in the ride-hailing firm's fourth-quarter results.
Lyft stock surged on Wednesday following its late Tuesday earnings report. That's despite some embarrassing headlines. The San Francisco-based company had to correct a typo in its earnings news release that initially sent the stock up nearly 60% in aftermarket trading Tuesday night.
Lyft's news release mistakenly said the company expected adjusted margins, as a percentage of gross bookings, to expand 500 basis points, or 5%, year over year in 2024. That should have said 50 basis points, or 0.5%, the company clarified on its earnings call.
"This is actually a correction from the news release," Chief Financial Officer Erin Brewer told analysts, according to a FactSet transcript.
The admission cut Lyft's more than 50% after-hours surge down to a roughly 18% gain late Tuesday. But on Wednesday, Lyft stock rallied more than 35% to close at 16.39.
Lyft Earnings Top Views
Despite the flub, Wall Street analysts liked what they saw, even if most are still neutral on Lyft stock overall.
The ride-hailing company said that it earned an adjusted 18 cents per share on $1.22 billion in sales for the December quarter. On average, analysts polled by FactSet expected Lyft to earn 8 cents a share on $1.22 billion in sales.
During the year-earlier period, Lyft lost 76 cents a share on an adjusted basis, while the company reported $1.18 billion in sales.
The company narrowed its net loss to $26.3 million, compared to a $588 million loss for the December quarter in 2022. Further, Lyft also said it recorded its highest-ever ridership in 2023, with more than 40 million riders.
For the current quarter, Lyft forecast gross bookings of $3.55 billion, at the midpoint of its range. That was ahead of the $3.46 billion forecast by analysts, according to FactSet.
Chief Executive David Risher, who took over the role last year, told analysts Tuesday that the company has focused on "customer obsession" to drive profitable growth. Lyft has also cut costs, which included layoffs last year.
Lyft Stock: Q4 Report 'Still A Good One'
For the full year, Lyft said it expects to generate positive free cash flow for the first time, a step toward profitability.
As for the flub on the company's margin expansion, analysts still took comfort in the revised number. RBC analyst Brad Erickson phrased it this way, in a note to clients: "500 (basis points) of margin leverage would have been amazing, but 50 works great too."
Erickson bumped his price target up for the stock to 17, from 15, but maintained a neutral "sector perform" rating on Lyft shares.
"After sorting out some momentary after-hours volatility on unintentional misinformation, Lyft's Q4 report was still a good one, indicating it is competing on a more stable footing," Erickson wrote.
He added that the report shows Lyft "is maintaining control of its expense drivers like incentives and insurance costs."
At least a dozen analysts upped their stock price targets for Lyft following the report, according to FactSet. But Wall Street is still neutral overall on the stock. Of the 43 analysts following Lyft, 74% hold a neutral or equivalent rating. Just 16% rate Lyft stock a buy and 9% have a sell rating, according to FactSet.
Lyft shares have lost more than 80% since its 2019 initial public offering. The company has struggled to keep up with its much larger rival, Uber.
Erickson wrote early Wednesday that Lyft's latest earnings report shows it is "much more adequately competing with Uber." However, Lyft's larger rival remains RBC's long-term preference, because of Uber's "durable structural advantages."
Last week, Uber reported fourth-quarter earnings that easily topped estimates. Uber also just posted its first full-year profit.
Lyft Stock: Technical Ratings
With Wednesday's jump, Lyft stock gapped up well beyond its 21-day and 50-day moving averages, according to MarketSmith.
Heading into the report, Lyft stock had an IBD Composite Rating of 72 out of 99, according to IBD Stock Checkup. The score combines five separate proprietary ratings into one easy-to-use rating. The top performing stocks typically score 90 or higher.
Further, Lyft's IBD Relative Strength Rating is 85 out of 99. The rating measures a stock's price movement over the last 52 weeks with that of others in IBD's database.
In addition, Lyft stock has an Accumulation/Distribution Rating of B-, which indicates more institutional buying than selling of shares.
