The market has tightened expectations of driving companies
Hello and welcome back to our regular view of private companies, public markets and the gray space in between.
This afternoon we look at Lyft's results, unpacking the company's performance, market expectations, and reasons why the hailing giant's shares are no longer available in off-business hours.
Lyfts Profits – according to Uber's own results, which promised investors a faster than expected path to (adjusted) profits – and the market's response to its performance provide a good framework for assessing investors' appetite for profit against growth. This is an issue that is important for both start-up founders and private investors.
Today's investigation is satisfactorily straightforward. We'll start with the big numbers, examine the comparative performance, and then weigh up what the market tells us.
Key Lyft Q4 2019 results
In the fourth quarter of 2019, Lyft's revenue was $ 1.017 billion, an increase of 52% over the previous year's $ 669.5 million. The company's number of "active drivers" increased from 18.59 million to 22.91 million from Q4 2018 to Q4 2019, an increase of 23%. Lyft's active drivers spent 23% more than the previous year, reaching $ 44.40 in the last quarter of last year.
In terms of losses, Lyft's net loss (a measure that includes all costs) for the quarter was $ 356.0 million, a significantly worse result than the net loss of $ 248.9 million in the fourth quarter of 2018. However, the company's adjusted net loss was $ 121.4 million, an improvement over the adjusted net loss of $ 238.5 million in the previous year.
Adjusted EBITDA, a heavily adjusted profit metric, lost $ 130.7 million in the fourth quarter of 2019, an improvement of $ 251.1 million on the fourth quarter 2018 adjusted EBITDA loss.
Investors had expected Lyft to report only sales of $ 985.8 million and an adjusted EBITDA loss of $ 163.2 million. The road had also expected 100,000 less active drivers and slightly lower earnings per active driver. So Lyft exceeded expectations for growth, number of users, health, and adjusted losses.
Despite this, Lyft's shares in over-the-counter trading have fallen by more than 4%. While Lyft stock recovered from the lows in October 2019, the company's equity is now more than $ 20 below the IPO price, considering the post-profit trend.
Why Lyft's stock should fall after exceeding expectations and not changing its earnings forecast may seem a bit confusing. It is not.
