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Lyft LYFT is bolstered by upbeat demand that is boosting its top line. The company’s proactive efforts to enhance financial security for rideshare drivers are encouraging. However, high operating expenses do not bode well for LYFT.
Factors Favoring LYFT
LYFT is bolstered by robust demand, achieving a 16% year-over-year increase in gross bookings in the third quarter of 2024, driving strong revenue growth. The platform supported 217 million rides and 24.4 million active riders, with total rides rising by 16%, reflecting broad demand across various use cases. Active riders grew by 9%, indicating improved retention and the addition of new users.
The company's strategic deal with DoorDash DASH Call ended 8:20 AM | 15m 25s is boosting its appeal by offering exclusive benefits to DashPass members, giving millions of users more reasons to choose Lyft for their rides. Additionally, Lyft is partnering with Mobileye, May Mobility, and Nexar to connect riders with autonomous vehicles starting in 2025 in Atlanta.
On Jan. 1, 2025, Lyft launched a first-of-its-kind program in Utah, partnering with Stride to contribute 7% of eligible drivers' quarterly earnings (excluding tips) to a Stride Save account for benefits such as health insurance, retirement savings and paid time off. Drivers had to achieve "Elite" Lyft Rewards status to qualify. This initiative, enabled by Utah's SB-233 legislation, aimed to provide independent contractors with access to benefits while preserving their work flexibility. Lyft’s program was designed to enhance financial security for rideshare drivers.
Owing to such tailwinds, LYFT shares have risen 3.3% over the past 90 days compared with the industry’s 3.1% jump.
Image Source: Zacks Investment Research
LYFT: Key Risks to Watch
Lyft’s financial stability is being challenged by escalating operating expenses and weak liquidity. In the third quarter of 2024, the company’s total operating expenses increased 32% year over year. This surge in operating expenses was primarily driven by a 37.8% jump in the cost of revenues due to higher ride volumes and increased per-ride insurance costs. Moreover, general and administrative expenses rose by 29.8% year over year in the third quarter of 2024.
Lyft's liquidity position is concerning. At the end of the third quarter of 2024, the company’s current ratio (a measure of liquidity) was 0.75. A current ratio of less than 1 is undesirable as it indicates that the company does not have enough cash to meet its short-term obligations.
LYFT’s Zacks Rank
LYFT currently carries a Zacks Rank #3 (Hold).