Headquartered in San Francisco, Lyft (NASDAQ:LYFT) is one of the most famous American ride-share businesses. Since the company’s initial public offering (IPO) a few years ago, LYFT stock has had its fair share of ups and down — and lately, it’s been in “elevator down” mode.
This actually points to an opportunity, not a problem. If Lyft’s financials are improving, then there may be a mismatch between the share price and the company’s true value.
Not long ago, Lyft posted its fiscal data for 2021’s fourth quarter as well as for the full year. The market’s response was less than enthusiastic, but does this mean Lyft dropped the ball?
The market doesn’t lie, but sometimes it misjudges. One particular factor seems to have weighed on Lyft’s ability to execute, but this doesn’t mean the company can’t thrive and provide outstanding shareholder value.
A Closer Look at LYFT Stock
It’s not every day we come across a stock with clearly established support and resistance levels like LYFT stock happens to have. For one thing, it demonstrated support at $21 on more than one occasion.
The stock has also encountered hard resistance at $67 multiple times. Consequently, traders can “play the range” with a buy-low, sell-high strategy.
Since March of 2021, LYFT stock has been in a state of decline. It recently came down to $37, which is closer to the bottom than the top of the range.
Very patient investors could wait for the share price to get into the low $20s, but there’s no guarantee it will actually fall that far. Besides, after we delve into Lyft’s financial stats, you may decide to just go ahead and start accumulating the stock today.
Narrowing the Loss
Sometimes, a net earnings loss can be a good thing — especially if it demonstrates improvement.
A case in point would be Lyft’s performance in fiscal-year 2021. During that time, Lyft narrowed its net loss to $1 billion from $1.8 billion in fiscal-year 2020.
That’s a 44% smaller net earnings loss, so it’s actually good news. Still, some investors might not choose to see the glass as half-full.
There’s a similar story to be told for Lyft’s net loss during 2021’s fourth quarter, which totaled $258.6 million. That result is a lot better than the company’s fourth-quarter 2020 net earning loss of $458.2 million.
On top of all that, Lyft CFO Elaine Paul added some more positive fiscal highlights.
“We had a solid Q4 and achieved full-year revenue growth of 36 percent in 2021. Revenue per Active Rider, Contribution Margin and Adjusted EBITDA all reached new highs in the fourth quarter, driven by improving service levels and higher ride volumes in our marketplace,” Paul stated.
The Primary Problem
Despite the slew of encouraging data points, Paul had to acknowledge that Covid-19 weighed on Lyft’s financials in 2021.
Nevertheless, Paul put a positive spin on the situation, saying, “Despite short-term headwinds from omicron, we remain optimistic about full-year 2022.”
How optimistic? Reportedly, Lyft is modeling first-quarter 2022 revenue in the range of $800 million to $850 million, along with adjusted EBIDTA (earnings before interest, taxes, depreciation, and amortization) between $5 million and $15 million.
If the primary problem has been the omicron Covid-19 variant strain, then it’s conceivable this issue will be temporary.
Lyft co-founder and president John Zimmer touched upon this point, stating, “I’d say if you look at the case count for omicron, it really spiked in January and has since come down. And so we’re … cautiously optimistic for our full year.”
In a similar vein, Lyft CEO Logan Green assured, “The demand rebound is a matter of when, not if,” and, “We are getting better and better at managing these temporary COVID-related spikes.”
The Bottom Line on LYFT Stock
The investing community didn’t seem to be particularly impressed with Lyft’s recently-reported financial results. Yet, the data points showed improvement.
Perhaps most importantly, Lyft’s net earnings loss appears to be narrowing. Achieving profitability could actually be a near-term goal for Lyft.
If the ride-share market recovers in 2022, this would certainly be great news for LYFT stockholders. Hopefully, Covid-19 variant strains won’t continue to cause problems for the company and the stock.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
