Lyft Inc (NASDAQ:LYFT) is expected to provide revised long-term financial targets when it hands down its fourth quarter results, with analysts at Jefferies seeing upside to the rideshare provider’s bookings led by higher pricing.
They forecast fiscal 2024 bookings 3%, or about $470 million, higher than the consensus analyst estimate based on new disclosures on bookings and rides.
“Our assumption is that rideshare industry growth decelerates from about 20% in fiscal 2023 to about 15% in fiscal 2024 and that Lyft holds market share steady,” the analysts wrote in a note to clients.
“We also assume that Lyft will see an about 2% year-over-year increase in pricing during 2Q to 4Q fiscal 2024, after lapping price reductions taken earlier this year to achieve parity with Uber. We expect Lyft to adopt a price-taker approach going forward, resulting in prices moving higher once Uber increases prices around its March insurance renewal.”
Based on this increased bookings growth following through to improved long-term free cash flow, the analysts raised their price target on Lyft to US$16. They have a ‘Hold’ rating on the stock.
Lyft shares traded hands 4% higher at US$15.69 on Wednesday afternoon.
The analysts also see decreased operating expenses from Lyft’s cost savings efforts being offset by higher insurance costs.
They see Lyft’s cost of revenue per ride increasing 8% year-over-year, versus the consensus estimate of a 3% increase.
“Our higher estimate for cost of revenue per ride drives our contribution profit about $145 million (7%) below consensus despite about $175 million (4%) higher revenue, fully offsetting our lower operating expenses and yielding in-line earnings before interest, taxes, depreciation and amortization (EBITDA),” they wrote.
The Jefferies analysts also pointed out that Lyft being able to hold its market share steady is essential for its long-term story.
“Lyft’s U.S. rideshare market share declined about 400 basis points between 2021 and 2023 but has remained at about 30% since taking prices down to parity with Uber in the first quarter of 2023,” they noted.
“We believe holding (or expanding) share would allow Lyft to participate in attractive industry growth, help avoid another price reduction, and provide efficiencies across the business.”