Bottom Line

It’s not a great sign when a company that has only been public for a month is already disclosing less information to investors.

Lyft’s decision to no longer disclose ride numbers or the value of rides booked shows us management no longer wants investors or drivers to be able to track the company’s cut of each fare or their per ride losses, which are substantial.

It will now be harder to track the underlying trends at the company which are driven off bookings and rides, not revenue and users.

Disclosure aside, Lyft (NASDAQ: LYFT) put out earnings that will likely leave the market unimpressed.

The company touted 95% year-over-year revenue growth, which was solid, but if investors looked a little deeper, they would have noticed losses still increased slightly over a year ago.

On an absolute basis, revenue was up $380 million, but costs increased $400 million, widening the company’s losses to $1 billion on an annual basis.

At this burn rate, Lyft’s $3.5 billion of cash gives it a three-year window to break-even or come back to the market with hat in hand.

As we pointed out in our Uber deep-dive, Lyft’s fixed costs are not scaling as the company grows.

We are concerned Lyft is a company that is fundamentally unable to turn a profit.

At a $20 billion valuation, we are sitting on the sidelines until Lyft can prove there is a clear path to profitability.

Our preferred way to play ride-hailing stocks is through a pair trade.

Buy Uber this Friday to take advantage of it’s better underlying economics and lower per ride losses while shorting Lyft.

We think this is a winning trade with all of the uncertainty swirling around the viability of the ride-hailing business model.

 

Operational Review

After a less than stellar debut on public markets, Lyft Q1 2019 earnings were released today. Lyft’s earnings came out just prior to competitor Uber’s IPO debut this Friday.

Lyft’s stock fell in after-hours trading after the earnings call and was down slightly by about 1% as of the time of this writing.

With Wall Street consensus of -$1.81 earnings per share for the quarter, Lyft performed much worse than expected on the bottom line coming in at losses of $9.04 per share. Lyft’s top line revenue, however, came in above consensus with the ride-hailing company posting revenues of $776 million, 5% better than estimates of $739.5 million.

Forward guidance from the company was also mixed. Lyft guided revenues of between $800 million and $810 million and adjusted EBITDA losses of $270 million and $280 million for the second quarter of 2019. Full-year 2019 guidance from the company estimated revenues of between $3.275 billion and $3.3 billion with adjusted EBITDA losses of between $1.15 billion and $1.175 billion.

Despite the large losses, the company did continue to post impressive growth numbers, however. Quarterly revenues grew 95% year over year, active riders grew 46% year over year and revenue per active rider grew 34% year over year.

Since the Lyft IPO on March 29, the stock has not performed well, down over 20%.

Lyft Share Performance Since IPO

Lyft Share Price since IPO - May 7 2019

Source: Yahoo Finance

Compare this performance to that of other recent tech IPOs such as social network cum ad platform Pinterest (NYSE: PINS) and video calling platform Zoom (NASDAQ: ZM). Those two stocks have been off to a great start, with both up nearly 20% since their debuts, so Lyft needed these earnings to show the markets their value, which they definitely did not.

Share Performance Since IPO of Lyft, Pinterest and Zoom

Share Performance since IPO of Lyft Pinterest and Zoom

Source: Yahoo Finance

One positive bit of news for Lyft though was an announcement that they are partnering with Waymo, the self-driving arm of Alphabet (NASDAQ: GOOG), to incorporate some of Waymo’s autonomous vehicles into Lyft’s fleet in Phoenix. If this small 10 vehicle partnership is a sign that Lyft is cozying up with the division of Google’s parent company that could mean Lyft may be able to pull ahead in the robo-taxi race with Uber.

Overall this earnings release did nothing to reassure investors that Lyft will one day be a profitable ride-hailing juggernaut.