Summer travel and more frequent commutes to the office gave a boost to Lyft Inc.’s second-quarter results on Tuesday. The ride-sharing platform’s third-quarter sales forecast also topped estimates, and executives were bullish on earlier efforts to cut prices, the growth of the ride-share market and upcoming back-to-school demand as people reshape their routines in the weeks ahead. But analysts and investors on Wednesday were zeroed in on the fourth quarter, when higher driver-insurance costs are expected to cut into margins.
The concerns sent Lyft
shares 9.2% lower on Wednesday. Some analysts also had bigger questions about the company’s overall efforts to turn a profit and separate itself from its larger rival, Uber Technologies Inc.
During the company’s earnings call on Tuesday, Lyft executives said their “preliminary view” into the fourth quarter suggested sales would likely grow in the “low to mid single digits quarter over quarter.” They also said adjusted earnings before interest, taxes, depreciation and amortization (Ebitda) margins, as a percentage of sales, would be “in line to slightly lower than the level” in the second quarter of 2023. Ebitda is already an adjusted figure often used by companies that are losing money to exclude items that add to those losses, in an effort to show investors progress on their path toward profitability. The potential hit to those margins would come after contract renewals on Oct. 1 for insurance that covers drivers when they’re picking up riders or taking them to their destination. “It appears that [Lyft’s] competitive pricing initiative will continue to weigh on the unit economics, and the upcoming insurance renewals could add some noise on the cost side later in the year,” Susquehanna Financial Group analyst Shyam Patil said in a note on Wednesday. However, he said that Lyft expected a smaller increase in insurance costs than last year. Along with lowering its prices, Lyft has rolled out new features to attract riders, including one that arranges rides for passengers as soon as their flight touches down at an airport, as well as a pilot called Wait & Save that offers cheaper …