Lyft (NASDAQ: LYFT) has been a disappointment for most investors since its IPO in 2019.

The stock fell shortly after its debut as cutthroat competition with Uber (NYSE: UBER) sank in and investors balked as both companies posted wide losses. The company continued to struggle during the pandemic's height, as the regular use cases for its service, like commuting, nightlife, and travel, were restricted.

Start Your Mornings Smarter! Wake up with Breakfast news in your inbox every market day. Sign Up For Free »

In recent years, the stock has remained down, but the business has made dramatic improvements. The company reported its first quarterly profit on a generally accepted accounting principles (GAAP) basis earlier this year as a detente with Uber, in which both companies have scaled back on driver and rider incentives, led to improved results at both companies. It's also rolled out new product improvements under a new management team.

Lyft stock is still down 77% from its peak five years ago, at the time of this writing, even after shares jumped on its recent earnings report. Revenue soared 32% to $1.5 billion on a 16% increase in gross bookings. That was a noticeable contrast with Uber, which tumbled on its earnings report earlier.

Let's take a look at what's driving Lyft's transformation.

Product updates are leading the way

Lyft has revamped its business largely with the help of product improvements and updates that have strengthened customer and driver loyalty.

For example, it introduced a program to connect women riders and drivers with each other called Women+ Connect, which was a requested product and has proven to be popular.

It's also launched a feature called price lock, allowing riders to use Lyft for regular commutes and lock in a lower price than they'd normally pay. The feature costs $2.99/month.

The company has also stepped up efforts to improve driver retention and satisfaction. That includes paying drivers for time when they're stuck in traffic, which is not typically priced into a fare. It's added a new feature that will only give electric vehicle drivers rides that are within their battery range, and drivers can see the estimated hourly rate of a ride before they accept it.

Finally, Lyft is gradually getting rid of its surge pricing, known as Prime Time, as management says that riders don't like surprise price hikes. Getting rid of it has led to an increase in market share and customer satisfaction.

Outside of the immediate ride-sharing business, the company has also launched an advertising business, Lyft Media, selling ads on its app. That business has contributed to the strong growth of its take rate, or revenue margin, which is up sharply as the company has gotten more efficient with incentives for drivers and riders. However, its innovations focused on drivers have paid off. It said that Lyft's driver preference is now 12 percentage points higher than Uber's.