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Why Lyft Stock Looks like a Buy Ahead of Q4 2019 Earnings

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Lyft (LYFT - Free Report) has failed to live up its pre-IPO hype. The ride-sharing firm continues to lose money as it competes fiercely with rival Uber (UBER - Free Report) . Despite the negativity, Lyft stock is up 10% in the last month. This means that Wall Street might expect a strong Q4 earnings report will help spark a run.

The Basics

Lyft, like Uber, has raced to expand as quickly as possible across the U.S. The competition between the two firms has caused a price war, which has hit both its top and bottom lines. On top of that, the ride-sharing firms face increased regulatory pushback.

Lyft’s third quarter 2019 revenue soared 63% to $955.6 million. Perhaps more importantly, the company’s active riders climbed 28% to reach 22.3 million. Yet, the San Francisco-based firm’s top-line growth didn’t stop it from posting a net loss of $463.5 million in the third quarter, which came in far worse than the year-ago period’s $249.2 million loss.

Lyft executives, however, remain confident in the company’s growth outlook. Management raised its full-year revenue outlook for the second quarter in a row and announced that it expects to report a smaller fiscal 2019 loss.

And the biggest news to come out of Lyft’s Q3 report was that it trimmed its probability timeline. “Importantly, we now expect to be profitable on an Adjusted EBITDA basis in the fourth quarter of 2021,” co-founder and CEO Logan Green said in prepared remarks.

 

 

 

 

Outlook

Lyft expects its fourth quarter sales to climb roughly 47% to between $975 million and $985 million. Our current Zacks estimate sits at $984.5 million. This top-line growth would fall well short of Q3’s 63% climb.

Last quarter, Lyft updated its full-year fiscal 2019 revenue guidance to between $3.57 billion and $3.58 billion, up from its previous $3.47 billion to $3.50 billion range. Peeking ahead to 2020, our estimates call for Lyft’s FY20 sales to climb 28.3% higher to reach $4.6 billion. Once again, this would mark a slowdown from 2019’s expected 66% sales expansion.

On the bottom line, the company expects to post an adjusted loss of between $708 million to $718 million in 2019. This marks significant improvement against its prior $850 million to $875 million guidance.

Our Zacks estimate calls for the firm to post an adjusted full-year loss of -$3.42 per share. Then its 2020 loss is expected to shrink to -$2.01 a share. The company has also seen its longer-term earnings revision activity trend heavily in the right direction.

Bottom Line

Lyft’s recent positive earnings revisions help it hold Zacks Rank #2 (Buy) right now. The stock also sports an “A” grade for Growth and a “B” for Momentum. And as we mentioned at the outset, shares of Lyft have climbed recently, up over 10% in the last month.

The broader market might also help Lyft, which is set to report its Q4 fiscal 2019 financial results on Tuesday, February 11. The S&P 500 and the Nasdaq both closed at new records Wednesday, as tech giants such as Apple (AAPL - Free Report) and Amazon (AMZN - Free Report) help lift the market during earnings season and shake off coronavirus fears.

More importantly, if Lyft is able to post adjusted profit by the end 2021 it would beat analysts’ expectations by a year. Looking even further down the road, Lyft envisions a future where it shuttles people around in driverless vehicles. And for investors who share the firm’s autonomous car vision, now might be time to hop in Lyft stock.

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