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Lyft stock jumps as much as 11% after ride-hailing firm said it could turn a profit by the end of the year

Feb 10, 2021, 21:52 IST
Business Insider
Lyft stock tumbled in 2020 but has since rebounded sharply thanks to optimism about coronavirus vaccinesAl Seib/Getty Images
  • The Lyft stock price jumped as much as 11% in early trading on Wednesday after its Q4 earnings.
  • Cost-cutting and a potential profit caused investors to snap up shares in the ride-hailing app.
  • Markets are warming to companies that stand to gain from a vaccine-driven rebound.
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The Lyft stock price jumped as much as 11% in early trading on Wednesday before slipping back, after the ride-hailing app said it could be profitable by the end of the year if vaccines help people return to normality.

Lyft's revenue fell 44% year on year in the fourth quarter to $569.9 million, its earnings showed on Tuesday, with the COVID-19 pandemic continuing to batter its business model.

But analysts chose to see the light in the earnings, including the company saying it had exceeded its cost-cutting goals and that a "strong summer rebound" could lead to a profit later this year.

The Lyft stock price rose as much as 11% in early trading to $59.40. Yet it then slipped back and was up 4.59% at $56.20 by 10.50am ET.

Lyft's stock has risen around 90% since the start of October as investors bet that the arrival of vaccines will fuel a recovery among struggling firms. In pre-market trading on Wednesday, Lyft stock had risen as much as 13%.

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After reporting $1.02 billion in revenues for the final quarter of 2019, Lyft's revenue declined to $955.7 million in the first quarter of 2020 and $339.3 million in the second quarter of last year. Lyft bounced back slightly with $499.7 million in revenue in the third quarter of 2020.

In the fourth quarter, ridership was still down 51% year on year. But CEO Logan Green told investors on Tuesday: "I believe we are now in a stronger position than at any time in the past, given the improvements we've made to our unit economics and our overall cost structure."

"We're like a tightly coiled spring positioned to drive strong organic growth and margin expansion as the recovery takes hold," he said. Logan added that the company expects to take advantage of "pent-up demand" among US consumers.

Ride-hailing companies like Lyft and Uber saw earnings plummet in 2020, as COVID-19 lockdowns curbed travel for most of the year. Yet their share prices have recovered sharply since tumbling in the spring of last year, thanks to optimism about coronavirus vaccines.

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Uber stock was up 2.72% in morning trading to $61.23 ahead of its Q4 earnings release on Wednesday.

Read More: GOLDMAN SACHS: Buy these 26 'best of both worlds' stocks set to soar with economic recovery even if interest rates stay low

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