Take a pass on Lyft stock, says Roth

Investors should remain wary of ride hailing company Lyft Inc (Lyft Stock Quote, Charts, News, Analysts, Financials NASDAQ:LYFT), although there could be better-looking financials over the second and third quarters of the year. That’s according to Roth Capital Partners analyst Rohit Kulkarni, who in a Monday report reiterated a “Neutral” rating and $12.00 target price on Lyft, saying although the company has lost market share to Uber after the pandemic, the stock could rally if Lyft manages to halt the trend.

Ahead of first quarter 2023 earnings due from Lyft on Thursday, Kulkarni noted two SEC filings last week by Lyft which showed the company laid off about 1,100 employees or about 26 per cent of its workforce and will incur $41-$47 million in one-time costs. This comes after about 13 per cent of its workforce was let go this past November.

Lyft also announced in late March a succession plan, with co-founders Logan Green and John Zimmer moving to non-executive roles and making way for David Risher to take the CEO spot.

On the news, Kulkarni said he’s encouraged with Risher’s decision-making velocity and he now has a positive bias towards Lyft.

“While we prefer Uber as a structural and long-term category leader, we are firm believers in reinvigorated management teams,” Kulkarni wrote. “Tactically speaking, and largely coincident with seasonally strong summer months, we see potential upside to the Street’s EBITDA assumptions for 2Q and 3Q. If Lyft is able to stabilize revenue trends, implying stable rideshare market share in the U.S., we wouldn’t be surprised to see near-term upside to shares.”

By the numbers, Kulkarni is expecting Lyft’s revenue to go from $4,095.1 million in 2022 to $4,576.3 million in 2023 and to $5,323.0 million in 2024, while EPS is expected to move from negative $0.96 per share in 2022 to negative $0.03 per share in 2023 and to positive $0.40 per share in 2024.

Comparatively, Kulkarni said he’s estimating low teens percentage revenue growth in 2023 and mid-teens growth in 2024, versus Uber which he expects will grow its global Rides bookings at a high teens rate in 2023 and a low 20 per cent rate in 2024.

“Lyft remains in a tight spot as a follower to Uber, and having lost market share after the pandemic. Any signs of stable market share coupled with a leaner cost structure could set up shares for a near-term rally in 2H23,” he said.