Lyft Inc (NASDAQ:LYFT) shares rallied over 31% on Wednesday, but was it a result of better-than-expected earnings or the leftovers from an accounting error-led bounce?
Margin growth may not be surging tenfold in 2024, but the outlook on riding-hailing firm Lyft is rosy regardless.
The US-listed mid cap erroneously reported a forecasted gross margin improvement of 500 basis points during its fourth-quarter earnings call on Tuesday, one zero more than the actual 50bps figure.
Investors licked their lips and shares flew 60% higher to $19.7 in post-market trades in response, before correcting back to $16.00.
That’s still a respectable 28% gain, and a justified one if Goldman Sachs latest research piece is anything to go by.
Lyft’s quarterly results surpassed Goldman Sachs' forecasts, driven by accelerated gross bookings growth and improved expense management.
This led to an adjusted EBITDA outperformance, marking a positive turn in the company's financial health.
The period saw a 47% year-on-year increase in driver hours, outpacing ride growth and indicating strong demand trends that are expected to continue into 2024.
Management anticipates approximately 20% yearly ride growth in the first quarter of 2024, aligning with January's performance.
While Goldman’s maintains a neutral rating on Lyft shares, it has increased the 12-month target from $15 to $16, reflecting a 31.9% upside from the Tuesday closing price.
“We continue to see Lyft as a pure play on the theme of transportation disruption in North America (including elements of the rise of micromobility) and look to the upcoming June Investor Day for a fuller framing of the company’s longer-term financial and
strategic roadmap,” said analysts.
Goldman’s has upgraded its first-quarter gross booking estimate from $3.61 billion to $3.55 billion, with revenues upgraded from $1.17 billion to $1.18 billion.
The potential negative impact of the company’s upcoming insurance renewal cycle means adjusting earnings have been downgraded from $58 million to $52 million for the quarter.