Lyft (NASDAQ:LYFT) shares plunged more than 30% on Wednesday after the ride-sharing company issued weak guidance and said it would boost spending to get more drivers to its platform, a move that caused several analysts on Wall Street to cut their price targets.
Wedbush Securities analysts Dan Ives and Ygal Arounian lowered their per-share price target on Lyft (LYFT) to $32 from $50, noting that the company’s practice of high spending on driver incentives and heavy investing in its platform won’t fly with investors at the moment.
“As a negative, Lyft is spending money like a 1980s Rock Star and this will have a violent negative reaction from investors in an already jittery market,” they wrote in a note to clients.
In addition, they added that investor “patience is wearing thin” on Lyft (LYFT) but said that the sharp decline in the company’s share price was a “severe overreaction.”
Lyft’s (LYFT) top rival, Uber Technologies (UBER) suffered a case of guilt-by-association as its shares fell more than 10%, even after it reported first-quarter sales figures that topped Wall Street’s expectations.
Lyft (LYFT) said it generated $55 million in EBITDA during the first quarter and $876 million in revenue, up 44% on a year-over-year basis. The company said its ride volumes bounced back later in the quarter despite the rise of the COVID-19 Omicron variant and sub-variants.
However, the company said it expects EBITDA to be between $10 million and $20 million in the second quarter, with revenue between $950 million and $1 billion, compared to the consensus estimates of $83 million in EBITDA and $1.02 billion in revenue, respectively.
Susquehanna analyst Shyam Patil went so far as to downgrade Lyft (LYFT) shares to neutral from positive, while also lowering the stock’s price target to $25. Patil said Lyft’s (LYFT) softer near-term outlook, increased investments and a number of broader concerns “are likely to weigh on shares in the near-term, causing us to move to the sidelines.”
RBC Capital Markets analyst Brad Erickson called the results “tough” and noted that the earnings call was even “tougher,” but caveated that the sharp drop in the stock was “overdone.”
Erickson, who lowered his price target to $42 a share, said that Lyft’s (LYFT) revenue, excluding incentives, is “likely tracking ahead of Street estimates [and] coming in indicates likely strength” beyond its second quarter.