Lyft stock (LYFT) has downshifted into reverse.
Shares of the No. 2 ride sharer initially popped 14% after hours on Tuesday immediately following earnings. Investors were apparently roped into some initial headline rosiness.
Lyft’s revenue figures came in line with estimates, despite immense pressure from larger rival Uber (UBER). That was seen as a key win.
The company’s third quarter sales guidance caught investors’ attention as well, coming in a couple million dollars ahead of estimates.
But despite the rosy outlook, Lyft shares turned lower, plunging roughly 6%. A quick and dirty comparison to Uber’s second quarter last week may help explain the share reversal.
Though Uber missed on the top line, the company offered a more positive outlook and notched free cash flow. Uber’s net income came in at $394 million, a stark win compared to the net loss of $2.6 billion at the same time last year.
Lyft’s core net loss clocked in at $114 million.
Meanwhile, Uber saw its number of trips rise 22% in the quarter. Lyft’s active riders improved only 8.2% from a year ago, hinting at further market share erosion to Uber.
The earnings rundown
Here are the key numbers that Lyft reported compared with Wall Street’s estimates, as compiled by Bloomberg:
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Revenue: $1.02 billion actual versus $1.02 billion expected
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Adjusted earnings per share: $0.16 actual versus -$0.01 expected
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Active riders: 21.5 million actual versus 21.1 million expected
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Q3 revenue outlook: $1.13-1.15 billion actual versus $1.08 billion expected
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Q3 ride-share volume growth outlook: +20%
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Q4 margin commentary from earnings call: sees margins down versus Q2 levels amid insurance contract renewals and heightened competition.
What we’re watching: pricing
Lyft management weighed in on its pricing efforts on the earnings call as Wall Street expected.
The company sounded like one itching for a renewed price war with Uber.
“Q2 represents a full quarter pricing ride-share competitively and roughly in line with the market. The balance in our marketplace improved, and we had strong driver growth and a strong mix of new and returning riders,” Lyft’s new CFO Erin Brewer told analysts.
Pricing is an area where Lyft has sought to be increasingly competitive, and Uber has publicly taken notice, with Uber CEO Dara Khosrowshahi dubbing Lyft a “tough competitor.”
“They’ve taken some tough actions, and they are competitive in pricing now,” Khosrowshahi said in the company’s second quarter earnings call. “Generally, our pricing is quite comparable to Lyft and that has resulted in, I’d say, a constructive competitive marketplace.”
What analysts were saying pre-earnings:
“The focus is on lower pricing right now to better compete with Uber. We think this should stabilize the market share position for Lyft, at least for the time being.” – CFRA’s Angelo Zino.
“We view evidence of ongoing recovery in driver supply as likely helping boost the Company’s take rate and EBITDA margin for Q2. The key question for LYFT remains on the company’s ability to ramp profitability – we expect management to provide additional color around [long-term] profitability goals in the coming quarters.” – Mark Mahaney, Evercore ISI
Allie Garfinkle is a Senior Tech Reporter at Yahoo Finance. Follow her on Twitter at @agarfinks and on LinkedIn.
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