Lyft (NASDAQ:LYFT) stock is tanking, down 30% today, after the ride-hailing and delivery company reported weak first-quarter earnings.
Importantly, Lyft did beat on analyst estimates for earnings per share and revenue. However, it seems Wall Street is pointing to a few other metrics as responsible for the decline.
Specifically, Lyft reported a net loss for the quarter of $196.9 million, including $163.2 million in stock-based compensation and payroll tax expenses. Looking to the current second quarter, Lyft said it expects revenue of between $950 million and $1 billion. That was below Wall Street estimates of $1.02 billion.
Overall, it seems the lower guidance and some lackluster results led to the sharp selloff in LYFT stock.
What Happened With LYFT Stock
Lyft blamed the first-quarter loss on the fact that it spent heavily on driver incentives during the January through March period, which hurt its financial performance. The San Francisco-based company also reported that it had 17.8 million active riders in Q1, which was below analyst estimates of 17.9 million. It also marked a sharp decline from the fourth quarter of 2021, when Lyft had 18.7 million active riders.
During a conference call with analysts, Lyft said that it plans to invest even more in driver subsidies throughout the remainder of this year, though it’s unclear exactly how much money the company will spend. Analysts and investors didn’t appear to like the guidance provided or the spending on driver incentives.
Before today, Lyft’s share price had declined 31% year to date.
Why It Matters
Today’s sharp decline pulls LYFT stock down to its lowest level since October 2020. Shares are also trading well below their IPO price of $72. Today’s selloff is likely to worsen investor sentiment toward ride-hailing and delivery companies that rely on an army of freelancers and gig economy workers.
Companies such as Lyft and Uber (NYSE:UBER) have struggled over the past few years as Covid-19 restrictions hurt their businesses, and as they continue to wage legal battles with governments around the world over their compensation policies and whether their workers are entitled to minimum wage and other benefits.
What’s Next for Lyft
It’s a bad day to be a LYFT shareholder. Depending on the direction of the overall market, the selloff in Lyft stock could accelerate today and going forward. The decline in the share price is unlikely to reverse until such time as Lyft can demonstrate improved earnings and provide a brighter outlook to Wall Street. Until then, Lyft’s stock is likely to remain pulled over to the curb.
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.
