Lyft (LYFT) is scheduled to report results of its first fiscal quarter after the market close on August 12, with a conference call scheduled for 4:30 pm EDT. What to watch for:
1. OUTLOOK: In a regulatory filing back in June, Lyft said that, "Given the stronger performance in May 2020 versus April 2020, the company expects that its adjusted EBITDA loss for the second quarter ended June 30, 2020 will not exceed $325M if average daily rideshare ride volume in June 2020 is unchanged versus May 2020 levels. This expectation represents an approximate 10% improvement relative to the company's prior expectation that its second quarter Adjusted EBITDA loss would not exceed $360M based on April 2020 ride trends."
"In addition to cost reduction actions that management described on Lyft's first quarter earnings call on May 6, 2020, the company has taken further steps to improve its financial position. Specifically, in May, Lyft completed a convertible debt offering, along with corresponding capped call transactions that resulted in an effective conversion price of $73.83 for the senior unsecured notes. On a pro forma basis for these transactions, Lyft held approximately $3.3B of unrestricted cash, cash equivalents and short-term investments as of March 31, 2020," the company added.
2. RIDES TRENDS: Lyft said in a regulatory filing that, "Rides on Lyft's rideshare platform in the month of May 2020 increased 26% versus April 2020 and were down approximately 70% versus the same period a year ago. Rideshare rides have increased week-over-week for 7 consecutive weeks since the week ended April 12, 2020. In the week ended May 31, 2020 rideshare rides were down approximately 66% versus the year ago period and increased 5.5% versus the prior week. Recent monthly rideshare ride growth has been stronger in specific cities where restrictions on social activities and visiting business venues have been eased, as well as other select cities."
"For the last three weekends, as restrictions on certain activities were eased in parts of the country, there was stronger relative sequential growth in weekend rides versus weekly rides on Lyft's rideshare platform. Rideshare rides during the weekend ended May 31st increased 36% versus the weekend ended April 26th and 53% versus the weekend ended April 12th, " the company added.
3. SLOWER RECOVERY: Ahead of quarterly results, Credit Suisse analyst Stephen Ju lowered the firm's price target on Lyft to $66 from $75, while keeping an Outperform rating on the shares. Whereas his prior thought process was that Lyft's riders will be returning back to work prior to spending on travel - hence from a sector perspective rideshare should recover prior to travel -, he now believes work/commute related activity will take some time to recover as corporations should behave in a more risk averse manner about bringing employees back into the office in favor of work-from-home.
Meanwhile, Jefferies analyst Brent Thill also lowered his price target on Lyft to $40 from $50 as the recovery in ride hailing is progressing slower than expected. While Lyft is levered to the U.S. economic recovery and valuation is cheap for long-term investors, Thill argued that near-term headwinds impede a quick recovery to the stock. He kept a Buy rating on the shares.
4. CA EMPLOYEE RULING: Uber (UBER) and Lyft were mandated to convert their California drivers from independent contractors to employees with benefits, Bloomberg's Joel Rosenblatt and Clare Roth reported on Monday. The judge's ruling in the case will not be the last word in the gig economy battle, as the companies are anticipated to appeal the preliminary injunction that could force them to halt their services as they figure out how to adjust their business model to comply with it, the authors noted. San Francisco Superior Court Judge Ethan Schulman halted the injunction for ten days so the companies can appeal his ruling, the report added.
Meanwhile, CEO Dara Khosrowshahi said in an interview with Stephanie Ruhle Wednesday on MSNBC that Uber would likely shut down temporarily in California if a court does not overturn the recent ruling requiring it to classify its drivers as full-time employees, CNBC's Lauren Feiner wrote. If the court doesn't reconsider, then in California, it's hard to believe we'll be able to switch our model to full-time employment quickly," Khosrowshahi said.
5. PEER RESULTS: Last week, Uber reported second quarter losses per share of ($4.72), with consensus at (86c), and revenue for the quarter of $2.2B, which was slightly better than the expected $2.18B. The company also said that Adjusted Net Revenue declined 33% year-over-year, Mobilty ANR declined 66% year-over-year and Delivery ANR grew 162% year-over-year. Gross Bookings declined to $10.2B, down 35% year-over-year, or 32% on a constant currency basis, with Mobility Gross Bookings declining 73% and Delivery Gross Bookings growing 113% year-over-year, each on a constant currency basis.
Additionally, Uber reported second quarter monthly active platform consumers of 55M versus 99M last year, and said it sees third quarter adjusted EBITDA loss to be in line with second quarter. The company believes it can achieve EBITDA profitability some time in 2021.