On Thursday, BofA Securities updated its outlook on Lyft (NASDAQ:LYFT), raising the price target to $19 from the previous $16 while retaining a Buy rating on the stock. The adjustment follows Lyft's latest financial results, which surpassed Wall Street's expectations in several key areas.
Lyft reported bookings, revenue, and EBITDA of $4.11 billion, $1.52 billion, and $107 million, respectively, outperforming the consensus estimates which were set at $4.08 billion for bookings, $1.44 billion for revenue, and $94 million for EBITDA. Notably, the EBITDA figure was aided by a one-time tax accrual of $14 million.
The company experienced a 16% year-over-year increase in rides and a 19% growth in users. Bookings also saw a 16% rise compared to the same period last year. Despite a 3% year-over-year decline in Bookings per Ride, attributed to a reduced frequency of Prime Time, this was more than compensated for by a decrease in contra-revenue incentives. These incentives have now reached their lowest percentage of bookings in the past six quarters.
Looking ahead, Lyft has provided guidance for fourth-quarter bookings to be between $4.28 billion and $4.35 billion, which is higher than the prior market expectations of $4.23 billion. EBITDA projections for the same period are set at $100 million to $105 million, significantly exceeding the Street's forecast of $85 million.
The company also reported a substantial free cash flow (FCF) of $242 million. Management has guided for an expected FCF of over $650 million for the full year 2024 and plans to invest $100 million in 2025 to mitigate the impact of stock-based compensation growth, which is anticipated to result in 2 percentage points less dilution.
In other recent news, Lyft has seen significant developments on multiple fronts. Massachusetts voters recently approved a measure allowing ride-share drivers for companies like Lyft to form unions, marking a first in the U.S. This decision allows drivers to collectively bargain over wages and benefits, potentially serving as a model for other states.
In the realm of autonomous vehicles, Lyft has announced strategic partnerships with companies including Mobileye, May Mobility, and Nexar. These collaborations aim to integrate self-driving cars into Lyft's ride-hailing network, with deployment plans set for 2025.
On the financial front, Evercore ISI maintained its In Line rating for Lyft, projecting the company's third-quarter earnings to modestly surpass Wall Street's expectations. TD Cowen also adjusted its price target for Lyft slightly upward, anticipating a 26% year-over-year revenue increase for Lyft's third quarter of 2024, with expected revenues of around $1.46 billion.
However, Lyft is also facing legal challenges. The U.S. government filed a lawsuit against Lyft, alleging deceptive advertising practices by overstating potential earnings for its drivers. These events, along with other recent developments, highlight the complex landscape that Lyft is navigating.
InvestingPro Insights
Lyft's recent financial performance and positive outlook are reflected in the latest InvestingPro data and tips. The company's revenue growth is particularly noteworthy, with a 40.64% quarterly increase as of Q2 2024. This aligns with the article's mention of Lyft's 16% year-over-year increase in rides and 19% growth in users.
InvestingPro Tips highlight that Lyft's net income is expected to grow this year, and analysts anticipate sales growth in the current year. These projections support the company's optimistic guidance for Q4 bookings and EBITDA, which exceed market expectations.
The stock has shown strong performance recently, with InvestingPro data indicating a 58.59% price return over the last three months. This positive momentum correlates with the company's better-than-expected financial results and BofA Securities' increased price target.
For investors seeking more comprehensive analysis, InvestingPro offers 11 additional tips for Lyft, providing a deeper understanding of the company's financial health and market position.
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