- LYFT stock experiences a surge of over 30% on Wednesday after a margin expansion mishap.
- Management clarifies that adjusted EBITDA will increase by 50, not 500, basis points by 2024.
- Fourth-quarter earnings and revenue exceed market expectations.
- Net income losses decrease significantly compared to the previous year for the rideshare firm.
Mistakes can sometimes lead to unexpected benefits, as evidenced by the recent surge in Lyft (LYFT) stock price, the primary competitor of Uber (UBER) in the rideshare sector. This surge was triggered by a typographical error in Lyft’s fourth-quarter earnings report.
As of the latest update on Wednesday, Lyft’s stock price has surged by 34% to \\(16.25, while Uber’s stock has also risen by 13% following the announcement of a stock buyback of up to \\\)7 billion.
Initially, the company’s earnings report indicated that adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) would expand by 500 basis points in 2024. This error caused LYFT stock to soar in after-hours trading on Tuesday, with the surge peaking at over 60%, before management corrected the statement to reflect a 50 basis point expansion.
Lyft Stock Earnings Update
Despite the correction, Lyft’s stock has witnessed a significant surge of over 30% on Wednesday due to the basis point error. It is evident that the initial excitement surrounding the typo contributed to the spike in share price on Wednesday.
There were speculations about a potential short squeeze triggered by heavy short positions before the earnings release, leading short sellers to repurchase stock to cover their positions. Approximately 13% of Lyft’s float was held short prior to the earnings announcement.
The fourth-quarter results themselves were impressive. Adjusted earnings per share (EPS) for Q4 stood at \\(0.16 per share, surpassing expectations by 8 cents. The GAAP EPS was \\\)-0.06, exceeding the Wall Street consensus by 12 cents. The company’s net loss decreased from \\(588 million in the same quarter of the previous year to \\\)26 million in Q4 2023.
Revenue witnessed a 4% year-over-year increase to \\(1.22 billion, slightly surpassing the Wall Street estimate by \\\)3 million. Additionally, gross bookings surged 17% from the previous year to reach $3.7 billion.
The total number of rides in Q4 rose by 26% year-over-year to 191 million. Furthermore, Lyft recorded a total of 709 million rides in 2023, marking an 18% increase from 2022.
S&P 500 Overview
The S&P 500 is a widely tracked stock price index that monitors the performance of 500 publicly traded companies, serving as a broad indicator of the US stock market. Each company’s impact on the index is determined by its market capitalization, calculated by multiplying the number of publicly traded shares by the share price. Since its inception in 1957, the S&P 500 has delivered remarkable returns, with \\(1.00 invested in 1970 yielding nearly \\\)192.00 by 2022, reflecting an average annual return of 11.9%.
Unlike some other indexes that follow specific inclusion rules, companies in the S&P 500 are selected by a committee. However, they must meet certain eligibility criteria, with market capitalization being a key requirement set at $12.7 billion or higher. Additional criteria include liquidity, domicile, public float, sector representation, financial stability, trading history, and industry diversity within the US economy. The nine largest companies in the index collectively account for 27.8% of its market capitalization.
Various trading methods are available for the S&P 500, including Contracts for Difference (CFD) through retail brokers and spread betting platforms, as well as investments in Index, Mutual, and Exchange-Traded Funds (ETFs) that track the index’s performance. The most liquid ETF tracking the S&P 500 is State Street Corporation’s SPY. Futures contracts are offered by the Chicago Mercantile Exchange (CME), while the Chicago Board of Options (CMOE) provides options, ETFs, inverse ETFs, and leveraged ETFs.
The performance of the S&P 500 is primarily influenced by the collective performance of its component companies as revealed in their financial reports. Macroeconomic data from the US and globally also plays a significant role, impacting investor sentiment and driving market gains with positive economic indicators. The Federal Reserve’s (Fed) decisions on interest rates further influence the S&P 500 by affecting corporate borrowing costs. Inflation rates and other metrics considered by the Fed also contribute to market movements.
Lyft Stock Projection
Lyft’s stock price reached a one-year peak on Wednesday at \\(16.77, a level not seen since February 9, 2023. Following profit-taking activities on Wednesday, LYFT stock has stabilized just below the previous high of \\\)15.95 from December 18.
A close above the previous high could embolden bullish sentiment and support further upward momentum. However, a retreat to the 50-day Simple Moving Average (SMA) support level, currently around \$13.50, may indicate a consolidation phase before a potential upward trend continuation.
LYFT daily stock chart