Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% of retail investor accounts lose money when spread betting and/or trading CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money

73% of retail investor accounts lose money when spread betting and/or trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.

FREE EBOOK

How to Day Trade Stocks & Indices

  • Place your first trade
  • Identify 9 chart patterns
  • Pro strategies step-by-step

You'll also receive our newsletter and other Opto emails in accordance with our privacy policy. This form is protected by reCaptcha

Don't miss out

Get our FREE Day Trading guide

+ Pro-trader interviews

You'll also receive our newsletter and other Opto emails in accordance with our privacy policy. This form is protected by reCaptcha

FREE Trading guide

Including Day trading strategy examples

+ Pro-trader interviews

You'll also receive our newsletter and other Opto emails in accordance with our privacy policy. This form is protected by reCaptcha

  • Earnings

How will Lyft’s share price react to Q3 earnings?

How will Lyft’s share price react to Q3 earnings?

Lyft’s [LYFT] share price has almost doubled since March lows thanks to passengers steadily returning to the service after coronavirus lockdown measures began to ease. Lyft’s share price has also been boosted by California’s Proposition 22 decision in early November, which ruled its workers can be treated as independent contractors rather than employees. As the tech company prepares to release Q3 earnings on 10 November, will Lyft’s share price take investors for a ride?

Lyft’s share price began 2020 at $43.58 and climbed to $53.94 on 11 February, before plunging to $16.05 on 18 March as coronavirus fears battered markets.

Despite revealing in May that its Q1 numbers had been strong, with revenues up 23%, the group warned that ride volumes among tourists, shoppers and office workers were being hit by the pandemic as more people stayed at home. Indeed, volumes in April were down 75% year over year.

However, as lockdowns and travel restrictions gradually eased, Lyft’s share price soared back to $40.98 on 8 June. Although Lyft’s share price was down 30.6% for the year to 6 November, it has recovered 85.9% since March lows.

 

 

Widening losses

In its second quarter earnings report, Lyft reported that revenues had fallen 61% and losses had widened, sending its share price down to $22.23 on 28 October. Fears over a second wave of the coronavirus and further lockdown restrictions kept pressure on demand. In September, executives at Lyft revealed that rides were down 53.6% year over year in the first two months of Q3.

However, as of last week, Lyft’s share price was boosted again by California’s decision regarding Proposition 22, which means the company will not have to spend money on employee benefits such as overtime pay and sick leave.

Looking ahead to the third quarter, analysts at Zacks Equity Research believe that, “with people mostly confined to their homes amid the ongoing coronavirus pandemic, Lyft’s ride volumes continue to be significantly weak”.

 

"with people mostly confined to their homes amid the ongoing coronavirus pandemic, Lyft's ride volumes continue to be significantly weak" - Zacks analysts

 

It forecasts that revenue per Active Rider — those who take at least one ride during a quarter via its app — would be down 30.3% from a year ago with total revenues reversing 47.5% to $502m.

However, it adds that ride volumes are now improving, meaning adjusted EBITDA loss for Q3 will be below $265m. That compares with $128.1m in 2019.

 

Is a sector outperformance possible?

There is certainly relief over the Californian verdict for investors, but the coronavirus pandemic remains a concern, potentially leading to further lockdowns, as well as restricted tourism and office working, until a vaccine emerges.

Even in the current so-called “new normal”, there are likely to be social and economic restrictions that will affect the demand for ride sharing. Lyft also suffers slightly in comparison with Uber [UBER] as it does not have added services such as food delivery.

As Schaeffer’s Investment Research argues, though, there is enough of an addressable market and plenty of cash in the company to see it ride through the pandemic. “It will likely ramp up its revenue growth for years to come and eventually reach profitability,” Schaeffer analysts wrote, adding: “Lyft remains poised for massive stock growth in the long term.”

 

"Lyft remains poised for a massive stock growth in the long term" - Schaeffer analysts

 

Evercore ISI has an Outperform rating and a $48 average target on Lyft’s share price. Benjamin Black, an analyst at the firm, said the Proposition 22 verdict had “removed the greatest overhang” threatening Lyft.

Black also said he believed that Lyft’s share price could outperform rival Uber given its greater US exposure and a “suppressed valuation multiple”.

Credit Suisse also holds an Outperform rating and a $66 target price. Stephen Ju, an analyst at the firm, stated that the Californian vote could stunt other regional efforts to change worker classification.

Wedbush analyst Dan Ives noted the decision has now lifted a “major threat to the future of the gig economy”.

Elsewhere, Deutsche Bank has a Buy rating and $55 target, according to The Fly. Analysts at Jefferies also rated the stock a Buy, giving it a price target of $40.

The consensus among 41 analysts polled on Market Screener is that the stock will Outperform, and they gave an average target price of $40.43.

Market cap $11.372bn
EPS (TTM) -5.47
Operating margin (TTM) -54.73%
Quarterly revenue growth (YoY) -60.90%

Lyft's share price vitals, Yahoo Finance, 9 November 2020

Disclaimer Past performance is not a reliable indicator of future results.

CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.

CMC Markets does not endorse or offer opinion on the trading strategies used by the author. Their trading strategies do not guarantee any return and CMC Markets shall not be held responsible for any loss that you may incur, either directly or indirectly, arising from any investment based on any information contained herein.

*Tax treatment depends on individual circumstances and can change or may differ in a jurisdiction other than the UK.

Continue reading for FREE

  • Includes free newsletter updates, unsubscribe anytime. Privacy policy

Free ebook

Tricks of the trade: 7 interviews with the world’s top traders

Get it now

Related articles