Lyft Inc. made a significant decision almost four years ago by discontinuing the reporting of certain metrics such as gross bookings and rides. This move, according to MoffettNathanson analyst Michael Morton, resulted in a “foggy windshield” for investors who were trying to grasp the underlying drivers of the company’s business.
Now, it seems that Lyft might be reconsidering its stance on these metrics as it gears up to release its fourth-quarter report. However, Morton remains uncertain about whether increased transparency will have a positive impact on the stock.
The Potential Return of Metrics
In his recent note, Morton suggests that with the announcement of their 4Q23 results, Lyft’s management is expected to provide long-term guidance and potentially reveal improved disclosures on bookings and volumes. This reemergence of these metrics raises the question: will investors respond favorably if Lyft discloses gross bookings and rides?
According to Morton’s analysis of non-traditional data points, the answer seems to lean towards a negative outcome. Additionally, any historical financial information provided may unveil the unsustainable take-rate tactics employed by past management to drive revenue.
A Downgrade in Lyft Shares
Taking into account concerns regarding competition and margins, Morton has downgraded Lyft shares from neutral to sell in his latest note. This decision reflects his apprehensions about the company’s future profitability.
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Overall, as Lyft navigates its way through the challenges of increased transparency and mounting competitive pressures, it remains to be seen how investors will react to the reported metrics in the upcoming fourth-quarter report.
Worries About Insurance Costs
Lyft is facing a concern about the ever-increasing insurance costs. The company’s Chief Financial Officer, Brian Morton, predicts that the expenses associated with insurance will grow more quickly than the revenue per ride for the coming years.
Insurance Price Hikes
Morton anticipates that Lyft will encounter continued insurance price hikes in the future. This will pose a challenging situation for the company, as it will have to decide whether to pass on these cost increases to either the drivers or the riders. Alternatively, Lyft may have to bear the burden of these costs itself in order to maintain competitive prices within the market.
A Difficult Decision
According to Morton, Lyft is in a lose-lose situation. The company relies on its competitor Uber to lead the way in increasing prices. However, Uber has shown a cautious approach to raising prices due to its better unit economics resulting from a wider customer base and diverse business operations.
Revaluation of Stock Price
Considering these concerns, Morton has adjusted his price target for Lyft’s stock from $10 to $7. In response, the stock has experienced a decline of approximately 5% in premarket trading on Tuesday. Furthermore, the company’s shares have already seen a decrease of 14% this year and closed at $9.43 on Monday.
