Multimodal transportation networks-operator Lyft, Inc. (LYFT), which is headquartered in San Francisco, is the second-largest ride-sharing service provider in the United States and offers various transportation options through the company’s mobile-based applications. The company faced several operational disruptions during the lockdown phase of the COVID-19 pandemic due to reduced demand. However, with rising vaccination rates and easing travel restrictions, rideshare demand is rebounding, which should benefit the company.

LYFT’s shares have soared in price since the company reported better than expected third-quarter earnings and outlined a path to sustained profitability on the back of drastic cost cuts and a return of riders and drivers. The company reported an 11% increase in active riders for the quarter ended September 30, but ridership remained 35% below peak levels registered before the pandemic. LYFT’s revenues increased 73% year-over-year to $864.4 million in its  fiscal third quarter, ended September 30. Its adjusted net income was $17.8 million, representing a 106.3% increase versus the prior-year quarter. Furthermore, the company’s EPS surpassed the Street’s EPS estimate by 266.7%. “We’re seeing the right things happening in the market and will begin to taper incentives in the quarter ahead,” said LYFT President John Zimmer.

However, considering that full-fledged business travel to offices has not yet resumed due to the continuation of remote working, and that many consumers are reluctant to travel with unvaccinated children, it could take a while before the company operates at its pre-pandemic capacity.

Here is what could shape LYFT’s performance in the near term:

Stretched Valuation

In terms of forward EV/EBITDA, LYFT is currently trading at 185.83x, which is 1,353.8% higher than the 12.78x industry average. Also, its 5.31 forward EV/Sales ratio is 156.7% higher than the 2.07 industry average.

Furthermore, LYFT’s forward Price/Sales is 250.4% higher than the 1.69x industry average, and its forward Price/Cash Flow is 119.9% higher than the 15.85x industry average.

Favorable Analysts Expectation

Analysts expect LYFT’s revenues to increase 65.1% year-over-year to $940.81 million in the current quarter, ending December 2021. The company’s revenue is expected to increase 34.4% in the current year and 39.2% in the following year. Its  EPS is expected to grow 112.1% in the current  quarter and 125.7% in the next quarter, and the Street expects LYFT’s EPS to rise 490.5% year-over-year to $0.82 in the next year.

Mixed Profitability

LYFT’s 32.85% gross profit margin is 12% higher than the 29.33% industry average. Also, its 2.83% CAPEX/Sales is 13.8% higher than the 2.49% industry average.

However, LYFT’s negative 69.34%, 25.06%, and 28.62%  respective ROE, ROA, and ROTC compare with the 13.32%, 4.99%, and 6.52% industry averages.

POWR Ratings Reflect Uncertainty

LYFT has an overall C rating, which translates to Neutral in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 distinct factors, with each factor weighted to an optimal degree.

The stock has a grade of C for Quality, consistent with its mixed profitability.

LYFT has a D grade for Stability, which is in sync with its beta of 1.90.

Among the 73 stocks in the Technology – Services industry, LYFT is ranked #36.

Beyond what I have stated above, one  can also view LYFT’s grades for Value, Growth, Momentum, and Sentiment here.

View the top-rated stocks in the Technology – Services industry here.

Bottom-Line

With solid progress on the vaccination front and the easing of travel restrictions, LYFT should benefit, considering its significant market share. However, the stock looks overvalued and is highly volatile. Thus, we think it is wise to wait for the stock’s prospects to stabilize before investing in it.

How Does Lyft, Inc. (LYFT) Stack Up Against its Peers?

While LYFT has an overall POWR Rating of C, one might want to consider looking at its industry peers, Celestica, Inc. (CLS), NetScout Systems, Inc. (NTCT), and Jabil Inc. (JBL), which have an A (Strong Buy) rating.

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