What happened to Lyft?

On Tuesday, Lyft Inc. delivered its financial results for the first as a public company. The ridesharing firm reported a $1.1 billion loss in Q1 but said that losses would peak this year and then start declining.  

Why is it important?

In general

As Lyft’s main rival Uber will go public later this week, investors’ attention is drawn to the ride-hailing business in general. All in all, Lyft’s management has turned more optimistic. Earlier the company said that it might never become profitable, now it pledges profit without specifying when though. It’s a tiny shift in sentiment but it can matter.   

For investors

The problem is that to increase the margin the company needs self-driving cars. This, in turn, requires a heavy investment that spoils financial reports. There are also problems related to the present as the company’s drivers went on a strike demanding higher pay and better working conditions.

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At the same time, data showed that Lyft’s revenue almost doubled to $776 million in the first 3 months of 2019. The forecast is that growth would slow to 52-53% for the full year. Still, the firm’s outlook for Q2 of $800-$810 million is better than analysts’ expectations of $783.1 million.

The company underlined major improvements in its core business. In particular, Lyft got more revenue per customer, reduced incentives, and boosted margins. The company’s reaping the benefits of the new technology it uses to match drivers and riders. In addition, higher-priced rides in luxury cars improve the margin.

Lyft announced on Tuesday that it would team up with Google’s self-driving car spinoff Waymo in Arizona to attempt to lure passengers away from ride-hailing market leader Uber. In the upcoming months, much will depend on whether Lyft manages to keep stealing the market share from Uber. All in all, there are good things about Lyft’s earnings report. These good things should help the stock’s price to stabilize in the medium term. 

For traders

The stock needs to push above $63 to get going higher. The further resistance levels are located at $66 and $70. Support is at $58 and $56. At the end of the week, Lyft will likely experience a spike in Uber-related volatility

Lyft Inc., h4 chart

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