Lyft shares slump despite an improved outlook
Shares in the ride hail company climbed 22% then fell to close all-sessions down 1%.
While the second quarter (Q2) beat and the outlook for Q3 was also an improvement, the CEO said rides receiving prime-time charge, or surge pricing, fell 35% sequentially in the second quarter, while the average per-mile fare was 10% lower year-over-year.
(Video Transcript)
Lyft Q2 earnings
Lyft, the popular ride-sharing company, recently released its second quarter (Q2) earnings, and the results were better than expected. While analysts predicted a loss of 17 cents per share, Lyft actually earned 16 cents per share, which is great news. The company's revenue for the quarter was also on target, coming in at $1.02 billion.
Looking ahead, Lyft is feeling positive about the future. They anticipate third quarter (Q3) revenues of $1.13 to $1.15 billion, surpassing the analyst consensus of $1.09 billion. They attribute this optimism to their focus on reducing costs and the expected increase in ride-sharing demand as the pandemic subsides.
Share price reaction
After the earnings announcement, Lyft's stock price initially soared to levels it hadn't seen since February. However, it quickly took a nosedive due to some concerning factors. The CEO shared that the number of rides with surge pricing (when prices increase during high-demand periods) dropped by 35% compared to the previous quarter. This had a significant negative impact on the company's earnings. Furthermore, the average fare per mile decreased by 10% compared to the previous year.
As a result of these disappointing factors, Lyft's stock price experienced a substantial decline. It ended extended trading down 1.33% and was expected to start the next trading session with further losses.
Investors were worried about the decrease in surge pricing rides and the decline in average fares since these are important factors that contribute to Lyft's profitability.
In conclusion, even though Lyft exceeded earnings expectations and provided positive revenue guidance, the stock price took a hit due to the decrease in surge pricing rides and lower fares. The company will need to address these challenges in order to regain investor confidence and ensure long-term profitability.
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