Lyft, Inc. (LYFT) stock prices were down a marginal 1.56% as of market close on May 4th, 2021, bringing the price per share down to USD$56.19 at the end of the trading day.
Recent Downtrend for LYFT
Following the U.S. Labor Secretary’s comment in an interview about a large portion of the gig demographic needing to be classified as employees, Lyft stock prices dropped by 12%. Uber also suffered an 8% dip, seeing how both companies rely heavily on low-cost flexible labor as an integral part of their business strategy.
Concerns About Looming Regulation Changes
Despite being a significant threat to Lyft’s future growth and bottom line, the reclassification of independent contractors has not yet been concretized. Analysts anticipate a compromise between Lyft and regulators. Nevertheless, the looming threat has had an impact as deterred investors, as evidenced by the fall in stock price despite the reporting of a very promising quarter.
Surging Demand for LYFT Services
With the onset of the global Covid-19 pandemic and consequent government restrictions having severely crippled Lyft’s business, the company has announced positive weekly year-over-year growth for the first time since the pandemic took hold. However, Lyft has had a hard time keeping up with the expansive growth. With many U.S. drivers still unwilling to resume driving for the company on account of safety and financial concerns, the company might have to adopt higher costs to incentivize drivers to return.
Q1 2021 Revenues
The company reported USD$609 million in revenue for the first quarter of 2021. Largely attributable to the onset of the pandemic, Q1 2021 reports experienced a 36% decrease as compared to the same quarter of the prior year. As compared to the USD$569.9 million reported in the fourth quarter of 2020, however, revenues were up 7% for Q1 2021.
Driving Net Loss Towards Profitability
Net loss for Q1 2021 was reported at USD427.3 million, up from the USD$398.1 million reported in Q1 2020. Of the number reported for Q1 2021, USD$180.7 million consisted of stock-based compensation and related payroll tax expenses. USD$128 million were related to adjustments to the liabilities for insurance required by regulatory agencies attributable to a range of historical periods.
Comfortable Liquidity Position
In light of the easing up of regulations restricting traveling during the Covid-19 pandemic, Lyft has seen a significant upswing in demand. The USD$2.2 billion in unrestricted cash, cash equivalents, and short-term investments reported by LYFT as of the end of Q1 2021 will provide the company with the leverage it needs to continue its trajectory of significant growth.
Future Outlook for LYFT
With a solid liquidity position and stellar financial reports for the most recent quarter, LYFT is set to recover from a year plagued by the pandemic. Current and potential investors are hopeful for the company and keep a keen eye out for changes to regulations of the company’s drivers, hoping for an outcome that does not dampen LYFT’s profitability.
