Lyft shares tanked 30% after the company issued weak guidance. Investors were concerned, selling off the stock in a sign of fear and panic.
But what exactly are Lyft shares, and how can investors understand how the current situation reflects on the state of the company? This article will explore the basics of Lyft shares and what you should know when considering investing in the company.
Overview of Lyft
Lyft, Inc. is a global transportation company headquartered in San Francisco, California. The company operates the Lyft car-ride service through its smartphone app, website and various car ride providers. Lyft’s services include standard car rides, single-person rides (shared rides) and self-driving cars. In certain cities, it also has a limited selection of alternative transportation offerings such as scooters, bike rentals, and food delivery service.
Recently, Lyft’s stock price plummeted 30% after the company issued weak guidance in its second earnings report since going public in March 2019. Following the report, several Wall Street analysts cut their ratings on Lyft’s stock to “sell” or “hold.” The company cited increased competition from Uber and other players and slowing user growth due to macroeconomic factors for its weak guidance and stock selloff.
What are Lyft shares?
Lyft shares refer to the stock of the on-demand ride sharing app Lyft, which is traded on the Nasdaq Global Exchange. Lyft shares are an example of what is known as a technology stock – meaning a company whose primary products and services revolve around technology. As an asset class, technology stocks have historically experienced higher levels of volatility when compared to their counterparts in other industries.
On October 30th, 2019, share values for Lyft tanked after the company put out weak guidance in their Q3 2019 earnings report. This signified a negative quarter for the company and sent many investors selling shares in the aftermath. The effect of this was felt almost immediately by holders of Lyft stock. Within minutes, prices had dropped significantly, leaving many wondering why this happened and how far it could go.
At its lowest point that day, share prices were down over 30% from their opening level – representing a huge shift in fundamentals overnight. Investors will now be scrambling to analyze whether this is just a short-term movement or whether longer-term implications are at play here when considering holding Lyft shares.
Lyft Shares Performance
Lyft, Inc. is a popular ride-sharing service in the United States, and its shares are publicly traded on the Nasdaq exchange. Last week, shares of Lyft experienced a sharp drop when the company issued weak guidance.
In this article, we’ll explore the performance of Lyft shares and why they tanked by 30%.
Historical performance of Lyft shares
Lyft Inc. issued its first earnings report in April 2019 and since then, Lyft shares have traded as high as $88.60 in June 2019 and as low as $32.80 in August 2019. The historic highs were hit soon after its fourth quarter results, which reported strong revenue growth of 95 percent year-over-year, but with a much larger than expected loss that pushed the stock down from its all-time highs to the low $60s.
Since then, Lyft’s stock has experienced several big swings due to mixed market sentiment about the company’s current performance and outlook for future growth. In November 2019, shares dropped approximately 10 percent after management issued weaker than expected guidance for next year on their third quarter earnings call. Additionally, analysts were less optimistic about their 2020 guidance numbers when compared to Uber’s lofty forecast.
In December 2019, Lyft closed out the year at just over $55 a share with investors uncertain whether this represented a bottom or more volatility was ahead for the upstart ridesharing company as it tried to navigate competitive pressures and rising costs associated with adding new services such as self-driving technologies.
Early May of 2020 saw Lyft shares drop over 30% again, this time due to investor concerns regarding a newly released report by Wall Street analyst Richard Windsor citing decreased rider demand due to COVID-19 impact on transportation trends generally reported by major Chinese ridesharing companies like Didi Chuxing and Meituan Dianping back in March of 2020 related to decreased demand levels. This pessimism forced many investors to adjust their long/short positions on Lyft’s stock resulting in an even sharper selloff that caused shares to hit an interim bottom near the $30 mark before ultimately closing at around $33 per share on May 7th, 2020 – nearly 40% below where they opened the year at late December 31st last year!
Recent share price fluctuations
Shares of Lyft Inc. have experienced fluctuations in price over the past year, culminating in a sharp drop on October 4th after the company reported weak guidance for the third quarter. After hitting an intraday high of $60.96 on September 30th, Lyft’s share price tanked nearly 30% to $43.45 at the close of trading on October 2nd.
The sell-off was primarily due to discouraging news that the company predicted a net loss between $310–340 million for Q3 2019 and lower than expected revenue growth of 11% year-over-year instead of the 25% predicted by analysts before its release. This news resulted in numerous brokerage firms downgrading their ratings or price target estimates on Lyft, further contributing to the steep decline in its share value.
Despite this volatility, indications remain bullish on Lyft’s potential long-term trajectory as a leading player in ride hailing services throughout North America and Europe; for example, it recently announced that it would be acquiring Motivate, one of North America’s largest bike share companies, which suggests that it is still investing heavily in growth initiatives despite its weak guidance numbers.
Lyft shares tank 30% after company issues weak guidance
Recently, Lyft shares tanked 30% after the company issued weak guidance. This has been attributed to a wide range of factors, including decreased demand for ride-hailing services during the pandemic and increasing competition from other players in the market.
This section will cover the most likely reasons why the share price dropped so much.
Weak guidance from the company
The recent decline in the share price of Lyft Inc. is due to weak guidance from the company. In late March 2021, Lyft released guidance for its first quarter of 2021 that fell short of Wall Street expectations, resulting in a 30% share plunge.
The company estimated that its total revenue for the first quarter would be between $1.38 billion and $1.40 billion, significantly below the $1.6 billion forecasted by analysts. Other disappointing information released was regarding adjusted earnings before interest, tax, depreciation and amortization (EBITDA) loss of between $195 million to $185 million – larger than Street forecasts of a loss of about $172 million – and active riders for the full year being around 14%-16% lower than pre-pandemic levels.
Additionally, Lyft staff wrote “We no longer believe our riders will return to pre-COVID-19 levels this year” The CEO Logan Green even warned investors “consumers are going to be taking fewer rides long term”. The market reacted strongly to these words and sold off heavily on these financial results dramatically impacting shareholder values with a dramatic sell off driving down prices over 30%.
Impact of the COVID-19 pandemic
The recent decline in share prices for the ride-hailing company Lyft can largely be attributed to the economic impact of the COVID-19 pandemic. As cities worldwide attempted to contain the virus, many areas drastically reduced public transportation options while increasing restrictions on private mobility, greatly diminishing both demand and supply sides of Lyft’s business.
On May 7th, 2020, after releasing their 1st quarter earnings report that showed a larger than expected decline in revenue and an adjusted loss, Lyft executives announced plans for new cost-reduction initiatives and streamlining their business model to increase efficiency and profitability in their core markets. However, the company also explained that they expected a continued “macroeconomic headwind” over at least four quarters due to the impact of the pandemic. These negative projections caused investors to sell off their shares of Lyft, leading to the sharp decline in share price.
Impact on Investors
The news that Lyft shares had tanked by 30% sent shockwaves through the investor community. Investors had all put their money in the ride-hailing company with the expectation of growth, and now many of them have seen their investments take a hit.
Moving forward, they must weigh the potential risks that investing in Lyft brings and decide whether it is a sound investment. In this article, we will look at this news’s impact on investors and its implications for the company’s future performance.
Impact on existing investors
The sharp drop in Lyft’s share prices has impacted existing investors, wiping away substantial wealth overnight. Moreover, with the company posting weak guidance and investors continuing to demand higher returns, Lyft’s market cap might have dropped significantly.
For existing shareholders, the impact of a stock tanking so quickly can be drastic. In addition to the obvious losses from selling the overextended shares at such a low price, many investors saw their equity in the company decrease overnight as well. This makes it more difficult for future investments, as new investments must consider a decreased equity stake in addition to initial losses from selling the overvalued stock.
Furthermore, as institutional investors reassess their portfolios in light of Lyft’s guidance announcement, many will likely be more cautious when it comes to evaluating companies that have been previously experiencing rapid growth. As a result, it will be important for Lyft and its competitors to show strong performances before being rewarded with higher valuations by the markets and institutions alike.
Impact on potential investors
The drop in Lyft shares shocked potential investors, as the company had just gone public around five months prior. However, Lyft saw a significant surge when they issued their initial public offering on March 29th, 2019. The IPO brought them $2.3 billion and the stock jumped from $87.24 to close at $78.29 during their first day of trading.
However, on July 2nd, 2019 Lyft issued weak guidance for its second quarter earnings that caused their stock prices to crash 30%, closing at $49.89 and wiping out nearly 17 billion dollars in market capitalization for the company. After this sudden decrease in stock prices, many investors looking into purchasing Lyft shares realized how volatile of an investment it is.
They thus changed their minds about investing in such an unpredictable asset. This type of issue could easily push potential investors away from buying additional stocks originating from tech companies whose future could be much more uncertain than other stocks such as those from more established companies like Coca-Cola or Microsoft.
tags = $975 million in revenue, fiscal fourth quarter of 2022:, fiscal fourth quarter of 2022:, Revenue, lyft q2 q2bursztynskycnbc 765m yoy 17.14m
