What’s Next For Lyft’s Stock?

Behind its simple ride-hailing concept, Lyft (NASDAQ: LYFT) has faced significant financial challenges, including underwhelming earnings and costly customer service investments. The company’s stock, despite a recent 10% year-to-date surge to about $14 (Jan. 6), remains almost 80% off its four-year high. Lyft’s challenges were compounded by fierce rivalry with Uber (NYSE: UBER) and the disruptive impact of the pandemic. With key platform upgrades in place, Lyft is now approaching profitability, paving the way for a possible stock rebound. The company’s impressive 2024 performance so far also suggests a turnaround may be underway.

In the first nine months of 2024, Lyft’s gross bookings were up 18% year-over-year (y-o-y) to $11.8 billion and its revenues grew 33% y-o-y to $4.2 billion. Notably, Lyft’s costs and expenses increased at a slower pace of 22%, which helped narrow its net loss to $39 million in the first three quarters, a significant improvement from the $314 million loss reported in the same period of 2023. In addition, the company’s rides were up 16% in Q3 to 217 million, with a 9% growth in active riders to 24.4 million. Meanwhile, if you want upside with a smoother ride than an individual stock, consider the High Quality portfolio, which has outperformed the S&P, and clocked >91% returns since inception.

Lyft is capitalizing on the growing ride-sharing market through strategic initiatives. The company is exploring innovative partnerships to fuel further growth, including a collaboration with DoorDash and agreements with autonomous vehicle leaders such as Mobileye, May Mobility, and Nexar. In fact, Lyft riders in Atlanta can expect to hail autonomous rides as early as 2025. This development holds particular promise, as a significant chunk of Lyft’s revenue currently goes toward driver compensation, making autonomous rides a potential cost-saving opportunity.

Lyft’s offerings cater to frequent riders, like office commuters. Its Price Lock plan ($2.99/month) provides discounted rates for regular pick-ups, saving users up to $40. Over 200,000 customers have signed up as of September 2024. Lyft has also boosted customer satisfaction by reducing surge pricing and increasing driver pay during traffic. Additionally, its in-app ad platform, Lyft Media, engages customers and generates revenue. We believe a stock rebound is likely – once investors recognize the full impact of Lyft’s improvements.

Overall performance in LYFT stock over the last 4-year period has been far from consistent, with annual returns being considerably more volatile than the S&P 500. Returns for the stock were -13% in 2021, -74% in 2022, 36% in 2023, and -14% in 2024. While LYFT stock has seen lackluster growth over recent years, the Trefis  High Quality (HQ) Portfolio, with a collection of 30 stocks, has provided better returns with less risk versus the benchmark S&P 500 index over the last four year period; less of a roller-coaster ride as evident in HQ Portfolio performance metrics.

Lyft anticipates fourth-quarter gross bookings to rise 15%-17% to $4.28-$4.35 billion, accompanied by adjusted EBITDA of $100-$105 million. This growth momentum is expected to continue for the full year, with similar growth rates projected. Furthermore, Lyft has raised its adjusted EBITDA margin guidance from 2.1% to 2.3% for the full year 2024. Looking ahead through 2027, the company aims to achieve 15% annual gross bookings growth and an adjusted EBITDA margin of 4%, demonstrating a steady growth trajectory across both revenue and profitability. With a relatively modest market capitalization of $6 billion, there’s ample room for growth if Lyft continues to deliver on its strategy.

[1] Returns as of 1/7/2025
[2] Cumulative total returns since the end of 2016

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