- Lyft (NASDAQ:LYFT) stock is at a new 52-week low after the company announced it is cutting costs
- Investors see the cost containment as a reversal from Lyft’s plans just a few weeks ago to ramp up spending on hiring
- Lyft shares are being hurt by a broader downturn in the share prices of richly valued, unprofitable companies
Lyft (NASDQ:LYFT) stock is sitting at a new 52-week low after the ride-hailing company announced plans to slow hiring and cut costs.
LYFT stock plunged 17% to finish trading at $16.72 yesterday, a new 52-week low. The management team said it needs to contain costs and preserve cash as it grapples with the turbulence hitting technology stocks.
Lyft’s share price fell further on Wednesday, setting a new 52-week low at $16.33.
What Happened With LYFT Stock
In a memo to employees, Lyft President John Zimmer said that the company isn’t planning to lay off staff this year, but it will rein in new hiring. Additionally, Lyft told staff that it plans to give eligible team members new stock options to help counter the declines in the company’s share price this year.
Zimmer said the company is “focused on accelerating profitable growth … We’re also being responsible about costs and will significantly slow hiring.”
News of the cost containment measures come just a few months after Lyft said it would ramp up spending on driver incentives this year to cope with persistent labor shortages.
Why It Matters
The problems afflicting Lyft and its declining share price are emblematic of the downturn seen in richly valued, unprofitable growth stocks this year. LYFT stock fell as much as 33% on May 4 after the company issued its latest financial results. Lyft reported revenue of $875.6 million, which beat Wall Street estimates of $844.5 million, as well as a loss per share of 57 cents versus expectations of a 58-cents-per-share loss.
While tepid, the earnings did beat analyst expectations. However, LYFT stock sold off heavily on concerns over the company’s announced plans to pour money into growing its driver base.
That the company now appears to be reversing course on that pledge and is instead moving to contain costs is being taken as a sign of deteriorating conditions within Lyft and the broader economy.
What’s Next for Lyft
Shareholders of Lyft look set to endure more pain as the company’s stock continues to fall to new lows. The current environment and souring sentiment are not helping LYFT stock. Neither is the company’s flip flop on spending this year and plans to hold off on new hires.
Until conditions improve within Lyft and on Wall Street, this stock can be expected to fall further.
On the date of publication, Joel Baglole 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.