Ride-sharing company Lyft (LYFT) -) just had one of the strongest quarters in its history.
The company reported second quarter earnings of 16 cents per share -- well ahead of analyst expectations for a loss of a penny per share -- on revenue that matched estimates of $1.02 billion.
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The company also guided for third quarter revenue between $1.13 billion and $1.15 billion, also topping Wall Street expectations of $1.08 billion.
But despite the strong results, investors may be balking at a big change the company's CEO floated during Lyft's earnings call.
"[Surge pricing] is a bad form of price raising," CEO John David Risher said during the company's earnings call. It's particularly bad because riders hate it with a fiery passion. And so we're really trying to get rid of it, and because we've got such a good driver supply... it has decreased significantly."
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Surge pricing, or primetime pricing as Lyft calls it, refers to higher prices dictated to riders during peak hours of operation when the number of available drivers may be lower than non-primetime hours.
Lyft says the number of rides affected by primetime pricing fell by 35% in the second quarter, resulting in a larger percentage of ride intent converted into actual rides taken.
So Lyft is basically saying that it has enough drivers to not have to increase prices during peak travel periods, and this driver balance is actually increasing the number of rides taken on the platform.
Investors are not buying it Wednesday, however, as Lyft is one of the biggest losers in early market trading Wednesday, falling 7.44% on heavy volume.
Uber (UBER) -) faced a similar trajectory when it released its quarterly earnings last week despite posting a surprise profit that was its first as a public company.
Shares slumped lower, however, after CEO Dara Khosrowshahi cautioned that Lyft was a "tough competitor" that is starting to become "competitive in pricing" in the U.S. market.
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