Lyft shares are underperforming compared to its main competitor, Uber, spiking concerns that the rideshare company may have to offset its losses with price gouging and cost-cutting measures. The company’s shares dropped by 32% on Friday, marking its worst single-day drop since its stocks fell by 30% in May 2022, the Wall Street Journal reported.
The company is on track to lose $2 billion of its market value and close to all stock prices it gained so far this year, according to Reuters. J.P. Morgan analysts, who were one of 13 who cut Lyft’s stock price targets, told the outlet, “Rideshare is now approaching full recovery in the United States, but Lyft is not.”
The company released its Q4 report on Thursday, saying Lyft experienced its highest revenue growth yet in the fourth quarter of 2022 and “strengthened” its “insurance reserves.” It said the company’s revenue had grown to $1.2 billion, a 21% increase from $6.9 million in Q4 of 2021.
Sources close to the matter told Gizmodo that the company had “beat every single metric” in Q4 and partly blame the drop in shares to the time of year because people who would normally use the app aren’t going out, but the company expects to see it rise in the long run. According to the source, the guidance shows there are more drivers on the road and because of this, there is less Prime Time - or surge pricing - meaning the prices are lower.
We’re also told Lyft looked at where the business could become more efficient, and confirmed the company used cost-cutting measures like the layoffs in November that cut nearly 700 jobs, making a difference of $29.2 million in revenue gained. The Q4 report also said it also implemented restructuring efforts, accounting for $57.4 million.
Logan Green, Lyft’s co-founder and chief executive officer, released a statement in the Q4 report, saying, “The better marketplace balance we see today creates significant opportunities for long-term profitable growth.
“To take advantage of this opportunity we must ensure competitive service levels. Reinforcing our competitive position, servicing more demand, and reducing our fixed and variable costs will put us in the best position to deliver strong shareholder returns.”
Lyft’s drop in shares comes just days after Uber reported a record-high revenue and ride-share subscribers, reporting a 49% revenue increase in Q4 2022 from the same time in 2021. Uber also reported it brought in 131 million riders in the fourth quarter last year, while Lyft fell well below those numbers, completing only 20.4 million trips.
Elaine Paul, the chief financial officer of Lyft said in the report that Lyft will continue to take steps that will increase its revenue in the upcoming year. “Our Q1 guidance is the result of seasonality and lower prices, including less Prime Time. Additionally, our different insurance renewal timing puts differently timed pressure on our P&L,” she said. “We are not waiting for that to normalize to achieve competitive service levels. We are focused on driving greater growth and profitability.”