Headquartered in San Francisco, Lyft (NASDAQ:LYFT) is an American ride-share business. Not only is the company reducing its workforce, but Lyft is also shutting down its business segment that rents cars to riders. Plus, an analyst recently provided a warning about LYFT stock as inflation-related headwinds could weigh on the company’s bottom line.
Inflation is a concern for businesses generally, but what about ride-sharing companies? It’s perfectly reasonable for prospective investors to ask how higher prices might impact a company like Lyft. Indeed, at least one Wall Street expert has weighed in on this topic.
Along with that, Lyft’s investors might be concerned as the company joins a growing list of businesses that are reducing their headcount. It’s not necessarily a great sign for the ride-sharing market, and it’s certainly worrisome for Lyft’s stakeholders.
What’s Happening With LYFT Stock?
Amid much fanfare, LYFT stock debuted for public trading at $87.24 back in March of 2019. LYFT stock held great promise as the stock’s trading volume reached 70 million that first day.
Not all promises get fulfilled, though. Recently, Lyft shares traded near $14. Needless to say, folks who bought the stock during the peak hype phase are in the red today if they held on for the ride.
Is this a toxic stock, or the bargain of a lifetime? Lyft’s financials suggest that there’s not much hope for a sustained comeback, unfortunately. The company’s most recently issued Form 10-Q, which covers the three months ended March 31, 2022, shows that Lyft incurred a $196.9 million net earnings loss during that period.
Perhaps it shouldn’t be too surprising, then, that Lyft is implementing cost-cutting measures. Specifically, the company laid off around 60 workers not long ago, according to The Wall Street Journal.
Furthermore, Lyft is reportedly shutting down the segment of its business in which consumers can rent Lyft’s cars on the company’s app. It’s certainly an unfavorable sign that Lyft is shrinking its headcount. Besides, investors could conclude that one of Lyft’s essential business segments has failed.
Moreover, experts at KeyBanc Capital Markets see inflation-related headwinds as a cause for concern for Lyft. With that in mind, KeyBanc analyst Justin Patterson gave Lyft a “sector weight” rating, which is similar to a “neutral” rating and isn’t particularly optimistic.
Patterson explained how high inflation could impact the financials of a ride-sharing company like Lyft, arguing: “Inflation has drastically raised the price of food. We believe more consumers will opt for dining at home as a lower-cost option.”
In other words, people will be less likely to order a Lyft ride to dine out. It’s a potential problem that some of Lyft’s prospective investors might not have considered, but ought to now.
What You Can Do Now
Going forward, investors should expect uncertainty with Lyft as the company may have difficulty dealing with high inflation. They can also acknowledge that Lyft’s layoffs and the shutting down of an essential business segment aren’t positive signs.
LYFT stock has already fallen sharply from its debut price. This isn’t a bargain, though, as the shares could easily lose more of their value. Therefore, it’s sensible to refrain from investing in Lyft altogether.
LYFT stock gets an “F” in my Portfolio Grader.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.