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ETFs to Play as Lyft Rides Past Estimates in Q4 Earnings

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It’s close to two years since Lyft (LYFT - Free Report) and Uber (UBER - Free Report)  hit the financial markets. Lyft went public at the end of March 2019, while Uber hit the markets in May 2019. Notably, the Lyft IPO had a dazzling market debut, only to nosedive soon after. It is to be noted that at the time of going public, both were loss-making companies.

The pandemic had an adverse impact on the ridesharing industry due to stay-at-home mandates and contactless activities.  This puts the spotlight on the earnings releases of these ridesharing giants as only that can decide the future course of the stocks. The sooner the duo records profit, the better should be their stock performances. Between the duo, Lyft came up with stellar earnings on Feb 9 after market closes.

Inside Lyft Earnings

Lyft shares jumped 11.8% after hours on Feb 9 after better-than-expected top and bottom-lines results in its Q4. A loss of 58 cents per share marked an improvement over the expected loss of 71 cents in the quarter, though deteriorated from loss of 41 cents in the year-ago quarter.

Lyft, which belongs to the Zacks Internet - Services industry, posted revenues of $569.90 million for the quarter ended December 2020, surpassing the Zacks Consensus Estimate by 2.37%. This compares to year-ago revenues of $1.02 billion. The company has topped consensus revenue estimates four times over the last four quarters.

Lyft's number of active riders in the fourth quarter fell more than 45% year over year to 12,552, but revenue per active rider rose by $1 to $45.40, beating expectations of $42.19 per active rider. Cost-cutting helped LYFT report better bottom line in the fourth quarter. Lyft indicated that its own cost cuts were ahead of target.

Lyft expects COVID-19 vaccine distribution to accelerate in the second quarter, making the return-to-normalcy a sooner-than-expected fact. "Based on the improvements we've made, there is a chance we can achieve profitability in Q3. Obviously, pulling in profitability would require a strong summer rebound," Lyft Chief Financial Officer Brian Roberts said during an investor call, as quoted on Business World.

ETFs versus Stocks: Which Should You Pick?

Lyft’s steady improvement can’t be ignored. Sooner or later, investment in ridesharing companies like Lyft and Uber should pay off. Moreover, during the peak of the pandemic, these shares were beaten down and now offer undervaluation.

Notably, Uber is due for earnings release on Feb 10 after market close. Lyft’s optimism has boosted Uber shares too by 6.4% after market session on Feb 9.

Still, investors who are having doubts about the speed of economic recovery, may give a thought to the fund approach. The stock has exposure to funds like ETFMG Travel Tech ETF (AWAY - Free Report) , Amplify Online Retail ETF (IBUY - Free Report) , Renaissance IPO ETF (IPO - Free Report) and SPDR S&P Transportation ETF (XTN - Free Report) .

LYFT has focus on these funds in the range of 3.95% to 2.83%. In the above-mentioned ETFs, IPO, AWAY and XTN have about 9.64%, 4.4% and 2.8% exposure to UBER, respectively.  Hence, these ETFs are good bets to play ridesharing earnings.

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