Lyft’s After-Hours Rally: A Speculation on a Typo in Earnings Release
Lyft, the popular ride-hailing platform, experienced a significant surge in its stock value after its earnings release on Tuesday. The rally, which occurred after trading hours, can be attributed to a typo in the company’s forecast for adjusted profit metrics. While the correction was made during the earnings call, it did not dampen the initial excitement, resulting in a 16% increase in stock value.
In its earnings release, Lyft projected a 500 basis point expansion in adjusted Ebitda margin, equivalent to around 5%. However, during the earnings call, Chief Financial Officer Erin Brewer clarified that the correct figure was actually 50 basis points. The correction was attributed to a “clerical error” and the company promptly issued a corrected earnings release.
Despite the typo, Lyft remains optimistic about its performance in the upcoming year. The company expects two key demand metrics to surpass Wall Street’s expectations and anticipates positive free cash flow for the first time. These forecasts follow significant staff cuts and cost management efforts by Lyft. The rebound in the ride-sharing industry has also benefited its larger competitor, Uber.
Lyft predicts mid-teens percentage growth in rides this year, surpassing FactSet’s forecast of around 11%. Additionally, it expects an increase in gross bookings that slightly exceeds the growth in rides. For the first quarter, Lyft forecasts gross bookings of $3.5 billion to $3.6 billion, higher than FactSet’s estimates. CEO David Risher highlights the growth in commute rides, particularly for employees at companies like Starbucks, FedEx, and Delta Air Lines. This segment accounts for more than 20% of Lyft’s rides per year.
Risher emphasizes Lyft’s focus on corporate customers and its commitment to doubling down on this segment. The company recently reorganized to prioritize larger corporate clients. While Lyft’s financials come after Uber’s fourth-quarter results, which exceeded expectations, Risher states that Lyft has not changed its pricing strategy in response to Uber’s moves. Both companies face challenges with higher insurance costs.
In terms of financial performance, Lyft reported a net loss of $26.3 million for the fourth quarter, a significant improvement from the $588.1 million loss in the same period the previous year. Adjusted earnings per share came in at 18 cents, surpassing FactSet’s forecast of 8 cents. Sales rose by 4% to $1.22 billion, in line with estimates, and gross bookings increased by 17% to $3.72 billion, exceeding expectations.
Lyft’s stock has shown a 12.4% increase over the past 12 months, while the S&P 500 index has risen by 19.1% during the same period. The typo in Lyft’s earnings release and subsequent correction may have caused temporary fluctuations in stock value but does not pose a legal risk according to legal experts.
Overall, despite the minor error, Lyft remains optimistic about its future prospects and expects to continue its growth trajectory in the ride-hailing industry. The company’s focus on corporate clients and cost management efforts position it favorably for the year ahead.
