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Here's Why You Should Hold on to LYFT Stock for Now
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Lyft (LYFT - Free Report) thrives on increased driver availability in a revitalized rideshare market, utilizing competitive pricing and cost-cutting to boost its bottom line. However, worries persist about its liquidity as the company may struggle to meet debt obligations, affecting its stock outlook.
Factors Favoring LYFT
Lyft benefits from increased driver supply. Active riders increased in all four quarters of 2023. Driven by a 10% year-over-year rise in active riders, total revenues increased 4.2% in the fourth quarter of 2023. Management expects ride growth to continue, projecting an adjusted EBITDA (calculated as a percentage of gross bookings) margin between 1.4% and 1.5% for 2024.
Lyft's new CEO, David Risher, aims to improve prospects through competitive pricing and cost-cutting efforts. LYFT plans to increase revenues by introducing in-app advertisements. For 2024, it expects slightly reduced capital expenditures compared to 2023 and anticipates achieving positive free cash flow for the first time. Approximately half of adjusted EBITDA is projected to convert into free cash flow for the full year 2024.
Key Risks
The labor department's reversal and the California court's ruling deeming Proposition 22 (Prop 22) unconstitutional pose significant threats to LYFT. Reclassifying workers as employees will raise labor costs.
In November 2022, Lyft underwent a workforce reduction, laying off around 13% of its employees, or approximately 700 staff members, attributing the decision to the economic slowdown. This followed a prior reduction of 60 employees in July 2023.
Lyft's liquidity concerns are evident in its fourth-quarter 2023 financials. With cash and equivalents of $558.64 million, falling below long-term debt (net of current portion) of $839.36 million, the company may struggle to meet its obligations.
BSY has an encouraging track record with respect to earnings surprise, having surpassed the Zacks Consensus Estimate in each of the trailing four quarters of 2023. The average beat is 16.61%.
The Zacks Consensus Estimate for 2024 earnings has been revised 3.03% upward over the past 90 days. Bentley Systems has an expected earnings growth rate of 12.09% for 2024. Shares of BSY have rallied 20% in the past year.
The Zacks Consensus Estimate for META’s 2024 earnings has improved 13.10% over the past 90 days. Shares of Meta Platforms have surged 145.5% in the past year.
META has an expected earnings growth rate of 34.10% for 2024. The company delivered a trailing four-quarter earnings surprise of 19.71%, on average.
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Here's Why You Should Hold on to LYFT Stock for Now
Lyft (LYFT - Free Report) thrives on increased driver availability in a revitalized rideshare market, utilizing competitive pricing and cost-cutting to boost its bottom line. However, worries persist about its liquidity as the company may struggle to meet debt obligations, affecting its stock outlook.
Factors Favoring LYFT
Lyft benefits from increased driver supply. Active riders increased in all four quarters of 2023. Driven by a 10% year-over-year rise in active riders, total revenues increased 4.2% in the fourth quarter of 2023. Management expects ride growth to continue, projecting an adjusted EBITDA (calculated as a percentage of gross bookings) margin between 1.4% and 1.5% for 2024.
Lyft's new CEO, David Risher, aims to improve prospects through competitive pricing and cost-cutting efforts. LYFT plans to increase revenues by introducing in-app advertisements. For 2024, it expects slightly reduced capital expenditures compared to 2023 and anticipates achieving positive free cash flow for the first time. Approximately half of adjusted EBITDA is projected to convert into free cash flow for the full year 2024.
Key Risks
The labor department's reversal and the California court's ruling deeming Proposition 22 (Prop 22) unconstitutional pose significant threats to LYFT. Reclassifying workers as employees will raise labor costs.
In November 2022, Lyft underwent a workforce reduction, laying off around 13% of its employees, or approximately 700 staff members, attributing the decision to the economic slowdown. This followed a prior reduction of 60 employees in July 2023.
Lyft's liquidity concerns are evident in its fourth-quarter 2023 financials. With cash and equivalents of $558.64 million, falling below long-term debt (net of current portion) of $839.36 million, the company may struggle to meet its obligations.
Zacks Rank
LYFT currently carries a Zacks Rank #3 (Hold).
Stocks to Consider
Investors interested in the broader computer and technology sector may consider stocks like Bentley Systems (BSY - Free Report) and Meta Platforms (META - Free Report) .Each stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
BSY has an encouraging track record with respect to earnings surprise, having surpassed the Zacks Consensus Estimate in each of the trailing four quarters of 2023. The average beat is 16.61%.
The Zacks Consensus Estimate for 2024 earnings has been revised 3.03% upward over the past 90 days. Bentley Systems has an expected earnings growth rate of 12.09% for 2024. Shares of BSY have rallied 20% in the past year.
The Zacks Consensus Estimate for META’s 2024 earnings has improved 13.10% over the past 90 days. Shares of Meta Platforms have surged 145.5% in the past year.
META has an expected earnings growth rate of 34.10% for 2024. The company delivered a trailing four-quarter earnings surprise of 19.71%, on average.