Lyft (LYFT) shares collapsed Friday following the ride-sharing group forecast softer-than-expected near term revenues and a plan to reduce prices and claw back market share lost to larger rival Uber Technologies (UBER).
Lyft said March quarter revenues would likely fall to around $975 million, well shy of analysts' estimates, with adjusted earnings in the region of $5 million to $15 million.
For the three months ending in December, Lyft reported adjusted earnings of $126.7 million -- with a reported loss of $248.3 million linked to accounting changes and a boost in its insurance reserves -- topping Street forecasts, as revenues rose 21% to $1.2 billion.
Lower prices, Lyft said, would compensate for the slower post-pandemic return in its key west coast markets, while an increase in drivers will reduce Lyft's ability to impose so-called 'surge' pricing.
"This is obviously not the level of growth or profitability we are aiming for or capable of. And we are laser-focused on driving additional growth and managing costs," CEO Logan Green told investors on a conference call late Thursday.
"Relative to three months ago, the competitive dynamics changed and the better marketplace balance we see today creates significant opportunities for long-term growth," he added. "To take advantage of this opportunity and grow the market, we must prioritize competitive service levels."
Lyft shares were marked 35% lower in early Friday trading to change hands at $10.69 each, extending the stock's six-month decline to around 45%.
Earlier this week, Lyft's larger rival Uber posted a narrower fourth quarter loss, alongside firmer ride revenues, and forecast solid near-term profits amid a return to normal commuting patterns and the ongoing travel and restaurant boom.
Looking into the first three months of the year, Uber said it sees adjusted earnings of between between $660 million and $700 million, topping the Refinitv forecast of around $593 million, with gross bookings pegged between $31 billion and $32 billion.
Lyft, by contrast, said it likely won't reach its earlier goals of $1 billion in adjusted earnings and $700 million in free-cash flow by 2024
"Lyft has executed admirably over the past several quarters of the ‘economic re-opening’, but the company's revenue performance has been overly reliant on pushing pricing in order to attract driver supply and extracting maximum revenue from a relatively smaller swath of riders," said D.A. Davidson analyst Tom White, who cut his rating to 'neutral' from 'buy' following last night's earnings.
White said that while the price cuts will improve rider conversion rates, just as its overall supply of drivers is starting to improve, the move will "flow through directly to the bottom line and causes a significant re-set of our 2023 EBITDA forecasts."