Lyft Stock Dropping Off a Big Opportunity for Long-Term Investors

LYFT could be well-positioned for massive stock growth in the long-term

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Lyft Inc (NASDAQ:LYFT) is the developer of a popular ride-sharing app. The company is slated to report earnings after the close on Tuesday, November 10 after the closing bell, and will look to continue its impressive streak of post-earnings pops. Lyft stock is down about 30% year-to-date, but has still doubled off from its 52-week low of $14.56 on March 18. 

Lyft has a market cap of $9.06 billion and a book value of $7.36 per share.  The company has no forward or current price-earnings ratios.

Earnings reports continue to shine brightly for Lyft. The company has beat expectations on all four of its most recent earnings reports. Lyft beat expectations in the third quarter and the fourth quarter of 2019 by $0.09 and $0.19, respectively. The company's top-performing quarter over the past 12 months was the first quarter of 2020, when it beat expectations by $0.31. Lyft reported a loss of 32 cents instead of the expected loss of 63 cents. In its most recent quarterly report, the company beat their target by $0.14. The company has a trailing 12-month EPS of -$5.47.

Lyft consistently grew its revenue annually between 2016 and 2019. Lyft has seen a whopping 852% increase in revenue since 2016. The company went from producing $343.3 million in revenue to $3.27 billion during this time period. Lyft produced $1.06 billion in revenue in 2017, representing a 200% increase from the $343 million it produced in 2016. In 2018, the company more than doubled its revenue production, producing a total of $2.16 billion. In 2019, Lyft produced $3.62 billion in revenue, a 68% increase year-over-year. Lyft has produced $3.27 billion in revenue over the past 12 months. That is slightly below a 10% decrease in revenue production as compared to 2019.

While revenue growth has been exponential for Lyft, the company has not performed as well on the bottom line over the past four years.  Lyft’s net losses grew on an annual basis between 2016 and 2019. In this time period, the company dropped its reported net income by nearly $2 billion. Lyft went from -$683 million in net income to -$2.6 billion. Lyft has produced a net income of -$1.66 billion over the past 12 months, which is nearly a $1 billion increase from what it produced in 2019.

Lyft currently has $2.78 billion in cash and $1.05 billion in total debt. The company’s balance sheet last had $5.69 billion in total assets and $2.84 billion in total liabilities. Lyft's total equity stands at $2.85 billion.

Lyft is still very much a company in its initial growth phase, allowing investors to excuse away the increasing net loss over the years. What matters most for Lyft is that the company continues its rapid revenue growth. Despite its biggest competitor, Uber Technologies (UBER),  having a leg up on Lyft, the huge total addressable market allows for both to co-exist and thrive.

A lot has changed in the past year for ride-sharing companies. Earlier this week, LYFT gapped higher after legislation was passed in California that ruled drivers are classified as contracts. And although COVID-19 fears should fade in the future, the company will have to continue to work around the longer-term regulations that will come as a result of it. The company will also have more battles to face in order to keep its drivers considered contractors instead of employees. Due to the company's decent cash load, Lyft should be able to survive the pandemic. The company will likely ramp up its revenue growth for years to come and eventually reach profitability. Lyft remains poised for massive stock growth in the long-term.

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