TD Cowen has adjusted its outlook on Lyft (NASDAQ:LYFT) shares, lowering the price target to $15 from the previous $18, while maintaining a Hold rating on the stock. The adjustment followed Lyft's second-quarter revenue increase, which was up by 4% against consensus estimates, attributed to a record number of rides and a higher take rate.
The company's EBITDA also exceeded expectations by 5%, a performance credited to improved incentive structures.
Despite the positive outcomes in the second quarter, Lyft's guidance for the third quarter of 2024 presented a less optimistic picture, with projections falling 2% below the midpoint of consensus estimates.
Additionally, the EBITDA guidance for the same period was forecasted to be 10.5% below consensus. Nevertheless, Lyft reaffirmed its full-year 2024 outlook for rides and EBITDA margin, and notably increased its free cash flow (FCF) forecast to approximately 90% of EBITDA conversion.
The firm's decision to revise its estimates and price target comes in the wake of Lyft's latest financial guidance. The company's updated forecast and recent financial performance have been taken into account, leading to the new price target of $15.
Despite the reduction, the Hold rating suggests that the investment firm sees the company's stock as neither overvalued nor undervalued at the current level.
Lyft's management has expressed confidence in the company's ability to maintain its ride volume and EBITDA margin through the fiscal year.
The raised free cash flow forecast is now expected to be roughly 90% of the EBITDA conversion.
Lyft reported its first-ever GAAP profitability in the second quarter of 2024, with a net income of $5 million. The company also recorded a significant increase in driver and rider engagement, with quarterly active riders reaching a record 23.7 million.
Lyft's Media division experienced a substantial revenue boost, increasing by over 70% from the previous year. The company has projected gross bookings to be between $4 billion and $4.1 billion for the third quarter, with adjusted EBITDA estimated at $90 million to $95 million.
InvestingPro Insights
Recent data from InvestingPro shows Lyft with a market capitalization of approximately $3.97 billion, reflecting its standing in the competitive ride-sharing market. Despite a challenging period, Lyft holds more cash than debt on its balance sheet, which may provide a cushion against short-term market fluctuations. Analysts also anticipate sales growth in the current year, aligning with the company's second-quarter revenue increase and record number of rides.
Moreover, the stock's current trading near its 52-week low could present a potential entry point for investors, especially considering the expectation for net income growth this year. These insights from InvestingPro, coupled with the company's optimistic free cash flow forecast, suggest that Lyft may have the resilience to navigate near-term headwinds. For investors seeking a deeper analysis, InvestingPro offers additional tips on Lyft's financial health and market position, which can be found on their platform.
InvestingPro Data highlights include a 19.88% revenue growth over the last twelve months as of Q2 2024, and an EBITDA growth of 102.91% in the same period, showcasing the company's ability to grow its earnings before interest, taxes, depreciation, and amortization. However, the stock has experienced a significant price drop over the last three months, with a 48.93% total return decrease, indicating market pressures and potential investor concerns.
With these insights, investors can better gauge the potential risks and opportunities associated with Lyft. For those interested in further analysis, InvestingPro offers a total of 17 additional tips on their website, providing a comprehensive view of Lyft's financial outlook.
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