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Lyft sees ride revenues recover by nearly 50% in just three months

Shares of Lyft are riding high, popping more than 7% in after-hours trading today after the American ride-hailing giant reported its Q3 earnings.

Lyft, which competes with Uber for rideshare, reported revenues of $499.7 million in the third-quarter, a 48% drop from the $955.6 million in the same year-ago period. That lackluster result is still a 47% improvement over last quarter when Lyft reported $339.3 million in revenue. That’s good?

Investors were heartened by the improvement and Lyft’s ability to beat analysts revenue expectations of $486.45 million. The company’s net loss of $1.46 per share was worse than expected, but investors appeared more bullish than bearish, buying up Lyft equity and boosting its value after the company’s earnings report.

Lyft’s quarter is a story of year-over-year declines and sequential-quarter gains. On that theme, the company’s active riders fell 44% compared to the year-ago quarter, and rose 44% compared to Q2 2020. Its revenue per active rider fell 7% compared to Q3 2019, but rose 2% from the sequentially preceding period.

Like Uber, Lyft is enjoying patience from investors as it digs its way out from a ride-hailing market pummeled by COVID-19; Uber has enjoyed a delivery business and international operations to buffer its ride revenue declines. Lyft, which is focused on the U.S. market and lacks a delivery program like Uber, has been more impacted by the domestic market.

Rising COVID-19 cases and ratcheting lockdowns could threaten Lyft’s recovery. Still, its core economics are not falling to pieces despite the pandemic. In Q3 2020, Lyft’s contribution margin — a metric that is akin to an adjusted gross margin result — was 49.8%. In the year-ago quarter it was 50.1%.

Lyft will return as long as ride volume recovers. Lyft’s next big hurdle is profitability. The company is still on track to achieve adjusted EBITDA profitability by the fourth quarter of 2021, even with a slower recovery, Logan Green said during the company’s earnings call Tuesday, adding that Lyft is taking an extremely disciplined approach to increase its operating leverage. Lyft is positioned to achieve that profitability goal with about 30% fewer rides than what was required when it originally issued its Q4 2021 profitability target last fall, Green said.

Lyft wrapped Q3 with $2.5 billion in cash and equivalents. Its operations have consumed $1.1 billion in cash so far this year, up around $156 million in the third quarter. At $50 million a month, Lyft has lots of room to get back to more pedestrian losses, and year-over-year growth.

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Tech stocks rip higher on Election Day

Tech stocks shot higher as American voters went to the polls, the gains coming far ahead of results that could indicate who will win the presidency.

American stocks broadly rose, with the S&P 500 index rising just over 2% while the tech-heavy Nasdaq Composite is up just under 2%. SaaS and cloud-focused shares are up a slimmer 1.8% as of the time of writing.

That 2% bump might seem negligible, but consider the past month. The Nasdaq was down just over 8% from all-time highs at the start of trading today. That makes today’s gains worth around a fourth of the gap from its recent declines back to record levels. The Nasdaq fell more than 10% from its recent peak before starting to recover in late-October, making today’s rally part of a developing upward trend.

Depending on how one reads the polling tea leaves, the gains could be read as an endorsement of either candidate’s platform.

Today’s stock market moves come on the back of an uneven technology earnings cycle, with major tech companies swallowing lumps, while some smaller industry players like Five9 rode COVID-19 tailwinds to strong results. Netflix, Intel, Apple, and others struggled to impress investors. Indeed, the domestic stock market’s reaction to earnings beats has been muted this cycle, in contrast to other areas; it appears that American equities were priced to surpass expectations.

For tech, today’s rebound is welcome, possible helping pave the way for a rash of IPO filings that are expected before the year’s end. Airbnb, DoorDash, and others are still candidates for flotation this year.

Certain share prices, notably those of Uber and Lyft, were already on the rise Monday on investor confidence that California voters will pass Proposition 22. The ballot measure, if approved, will exempt the ride-sharing companies from a new California law that forces gig economy workers to be classified as employees rather than contractors.

Pulling back for a moment, Uber’s share price is still down about 3.87% from one month ago. But it’s been recovering, with a pop in the past two days. Uber’s share price closed 2% higher Monday and is now up about 2.7% in trading today. Lyft has experienced an even larger bump with share prices rising 5.67% on Monday. Lyft shares are up 6.39% in midday trading today.

The stakes are high for Uber and Lyft this Election Day. If Proposition 22 fails, the companies say they will have to change their business models. Both companies have threatened temporary shutdowns in the state if forced to comply with the new California law. For now it seems, investors believe Uber and Lyft will be able to continue to operate as they always have.

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