Ridesharing companies have been struggling in the midst of this pandemic as people shy away from using ridesharing services. Some companies, such as Uber, are losing money at a significant rate, with their previous plans of becoming profitable this year being pushed back considerably.
Most other ridesharing companies out there are seeing a similar trend in their financials. Uber’s next biggest rival, Lyft (NASDAQ:LYFT), reported a drastic 61% decline in revenue during its recent second-quarter financial results, which were released on Wednesday.
The biggest problem facing Lyft is that it might end up having to suspend its operations in California due to a new labor law. As of August 21, California will require all ridesharing companies to declare their contractors as employees, something that would radically impact how their businesses would operate. As such, Lyft said that it might stop all operations in California, further hurting the company’s future revenue results.
Revenue for the quarter came in at $339 million, slightly higher than the $337 million expected by analysts, but still down 61% from around the same time last year. Right now, the number of active riders Lyft has is at 8.7 million, a fairly respectable figure overall. However, considering that around 16% of the company’s total rides are from California, losing this state could be a further devastating blow for Lyft.
“Lyft’s second-quarter results reflect an operating environment that was not only challenging for our core ridesharing business, but also for our valued riders and drivers and the communities we serve. Our performance reinforces our belief that Lyft is taking on the critical work necessary to emerge from the crisis as a stronger company,” said Logan Greene, Lyft’s CEO and co-founder in an official statement.
Shares of Lyft ended up dipping around 1.5% in response to the news. While the revenue dip was a pretty big deal for the company, most analysts and traders were already expecting something like this to happen. The stock could continue to dip a bit within the next 24 hours as more traders react, but likely not by much.
As of right now, most analysts covering Lyft remain optimistic about its future chances, despite this short-term setback regarding the coronavirus. Around 23 analysts have a “buy” rating on the stock, in comparison to just 15 that have a “neutral” rating. No analyst on Wall Street has a “sell” rating of any sort. While shares are still trading at a significant discount to where they were a few months ago, there’s a good chance in the long-term that the company will recover in the future once everything settles down.
Lyft Company Profile
Lyft is the second largest ridesharing service provider in the U.S., connecting riders and drivers over the Lyft app. Lyft has recently entered the Canadian market, in efforts to expand its market outside of the U.S. Incorporated in 2013, Lyft offers a variety of rides via private vehicles, including traditional private rides, shared rides, and luxury ones. Besides ride-share, Lyft also has entered the bike- and scooter-share market to bring multi-modal transportation options to users. – Warrior Trading News