By Yuvraj Malik
(Reuters) -Lyft signaled on Tuesday it would double down on competitive pricing to catch up with larger rival Uber, taking the shine off its strong earnings forecast and sending the company’s shares down nearly 8% in extended trading.
Under new CEO David Risher, Lyft has lowered ride fares and embarked on an aggressive cost-cutting drive to reduce Uber’s growing lead in the North American ride-share market.
But that strategy dragged down its revenue per active user by 5% to $47.51 in the second quarter.
The figure also missed estimates of $48.38, according to Visible Alpha.
“We really want to price competitively,” Risher said in an interview, days after rising fears of a price war slammed Uber shares and overshadowed the company’s positive results.
He added that rides receiving prime-time charge, or surge pricing, fell 35% sequentially in the second quarter, while the average per-mile fare was 10% lower from a year ago. That lower pricing, however, helped spur an 8.2% jump in the number of active riders on the platform to the highest in nearly three years, as Lyft also benefited from a travel rebound and more office commutes.
Third Bridge analyst Nicholas Cauley, however, said the company’s efforts to offer more competitive pricing could lead to higher driver incentives, affecting its profit target.
“The timeline for profitability could be extended as Lyft’s management is focused on winning back drivers and riders,” Cauley said.
In the quarter ending September, Lyft expects revenue in the range of $1.13 billion to $1.15 billion, higher than estimates of $1.09 billion, according to Refinitiv data.
The company, which has promised profitability by 2023-end, forecast adjusted core earnings of $75 million to $85 million and a margin of 7%. Analysts were expecting $49.7 million.
Revenue grew 3% to $1.02 billion, in line with estimates, while adjusted EBITDA of $41 million was well above expectations of $27.9 million.
On an adjusted basis, it earned 16 cents per share, compared with a 1-cent loss estimate.
(Reporting by Yuvraj Malik in Bengaluru; Editing by Anil D’Silva)
