Lyft Stock Lacks Sufficient Catalysts to Drive It Out of the Gutter
Lyft (NASDAQ:LYFT) stock has run out of gas while trying to find a bottom in 2022. In fact, LYFT stock has lost of 72% year-to-date. And I think the bottom could be even further away. At the end of the day, the company’s business model does not inspire confidence, and certainly does not provide any plausible reason for the stock to move higher.
In 2019, Lyft reported a sales growth of 67.67%, and in the year before its growth was even more impressive at 103.48%. Then the covid-19 pandemic hit and 2020 was a bad year for Lyft (sales plunged 34.60% according to MarketWatch data). Although LYFT recovered with 35.68% growth in 2021, things haven’t quite been the same since the pandemic.
Turning to the first quarter of 2022, Lyft reported revenue growth of -9.73%. This was the third consecutive quarter where the company reported lowering sales growth, and the first one with negative growth. It seems Lyft is slowing in revenue growth, which is not a good thing.
With all of that said, here’s a closer look at why you should avoid LYFT stock moving forward.
| Ticker | Company | Current Price |
| LYFT | Lyft | $12.64 |
Lyft Stock Lacks Important Catalysts
Right now, there are no catalysts that could move LYFT stock. The next important date is in early August 2022, when the company will release its financial results for the second quarter of 2022. Until then, the stock will probably move in tandem with the broader stock market, which is mostly lower, since we are in a bear market.
In the first quarter of 2022, Lyft reported mixed earnings. According to SeekingAlpha data, the EPS GAAP of – 57 cents was a miss by 2 cents and revenue of $875.58 million was a beat by $29.35 million.
The estimate of EPS GAAP for Q2 2022 is – 57 cents, which if it materializes, will show that Lyft is not making any progress toward profitability.
Lyft Drivers Claim Price-Fixing in Lawsuit
Another headline has helped dampen the case for LYFT stock to run higher in 2022. Lyft and Uber (NYSE:UBER) drivers have accused the companies “of unfairly controlling how much passengers are charged for rides in an antitrust lawsuit in California state court.”
The lawsuit is significant because if customers are paying more and drivers are earning less, both parties will be unhappy. On the other hand, if Lyft offered lower prices to consumers, it would have a severe problem, as it would take much longer to reach profitability. (Don’t forget that Lyft has been losing money since 2017).
Lyft probably does not want to lower the pricing of its services, as its fundamentals are weak. So there’s really no “winning” in this scenario.
Lyft Stock Is Still Too Expensive
According to SeekingAlpha data, Lyft stock has a forward price-to-book ratio of 3.72x and a forward price-to-cash flow ratio of 19.05X.
These figures show that the stock is pricey. The fact that shareholders have been diluted in the past year, with total shares outstanding growing by 5.7% does not help LYFT either while it searches for a bottom. Likewise, the company is expected to remain unprofitable over the next three years, which is another reason to avoid it.
This combination of net losses and cash burn, alongside weak fundamentals, is a negative mix. As such, I expect Lyft shares to move lower.
On the date of publication, Stavros Georgiadis, CFA did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
