LYFT – a forgotten stock?

While Wall Street is so upbeat about Uber, LYFT seems to have been forgotten. Yes, LYFT's fundamental strength isn't quite equal to that of its bigger rival, but it is also selling at a far cheaper valuation. The business already engaged in significant cost cutting during the epidemic, which assisted in reducing its cash burn, and it has continued to do so this year. The end outcome is a business with $900 million in net cash on the balance sheet and positive adjusted EBITDA.

Management mentioned that their platform is close to “multiyear highs” in terms of active drivers and riders during the conference call. The business had previously launched its “wait and save” function to assist riders in saving money. The management reported that wait and saved trip volumes exceeded their all-time high by more than 40% YoY. Riders seem to be more willing to wait than carpoolers. The back-to-school and back-to-work seasons are seen by management as opportunities to increase market share because they think that “riders tend to change their habits” over time. However, this perspective may be excessively optimistic.

What are the main dangers? LYFT is now performing at a high level in terms of cash flow, but it is feasible that UBER will gain market share or that the two will engage in more fierce price competition. If that happened, LYFT might start burning money. Although maintaining some degree of pricing stability is in both of these companies' best interests, even in this context of increasing interest rates, it is difficult to predict what might occur. LYFT faces regulatory risk since it may someday be required to classify its gig workers as employees, which would require it to offer employee benefits. As a result, there can be lower profit margins, higher rider fares, or even both.

Although LYFT seems to be falling behind UBER in the rideshare market, a buy recommendation is more favoured since the company's strong cost-cutting efforts and net cash balance sheet could result in a margin surprise in the upcoming quarters.

https://sg.news.yahoo.com/lyft-earnings-surprised-wall-street-and-the-stock-initially-spiked-but-now-its-tanking-202310177.html