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Stock Analyst Update

Higher Ride Volume and Driver Increase Strengthen Lyft

We are raising our fair value estimate for the company.

Mentioned:

Lyft’s (LYFT) third-quarter results beat the FactSet consensus estimates on the top and bottom line as demand for the firm’s services continued to strengthen with increases in riders and revenue per rider. On the supply side, more drivers jumped on the platform, which together with strong demand displayed Lyft’s network effect moat source. Higher ride volume along with lower rider acquisition costs improved Lyft’s adjusted EBITDA margin.

Management’s fourth-quarter guidance implied stronger full-year performance than our projections. We are now assuming slightly higher net revenue and adjusted EBITDA as impact of the delta variant continues to decline in most markets and travel volume continues to increase.

We are increasing our fair value estimate for Lyft by 5% to $66, which represents a 46% upside from the stock’s Nov. 2 closing price. We also think that Lyft’s third-quarter results foreshadow Uber’s third-quarter ridehailing performance, which it will report on Nov. 4.

Third-quarter revenue came in at $864 million, up 73% from last year, driven by more riders (51% growth from last year) and more drivers (45%). In addition, 47% more new riders were activated on Lyft than last year. Net revenue stood at 90% of 2019 third-quarter levels (up from 88% in the second quarter and from 52% last year), while riders were at 85% (up from 79% last quarter and from 72% in 2020). Net revenue per rider grew 14% year over year to $45.63, driven by increase in the number of rides requested per rider, which more than offset decline in prices.

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Ali Mogharabi does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.