Lyft, Inc. (NASDAQ:LYFT) is probably at an inflection point. LYFT stock is set to move higher, and as such, it looks like good value here. People are starting to move and travel more as economic growth rises.
Lyft management said as much in their May 4 earnings release for Q1: “We had an exceptionally strong Q1 as more people started moving again.”
Their revenue rose 7% on a quarter-over-quarter basis. In addition, its EBITDA (earnings before interest, taxes, depreciation, and amortization) losses improved. I don’t even look at net income for these kinds of companies anymore since they are so full of non-cash charges.
But more importantly, Lyft has an ebullient outlook for its business, with CFO Brian Roberts saying, “Our results meaningfully exceeded our outlook driven by elevated demand across our network.”
Moreover, they expect Q2 revenue will be 100% to 106% higher than last year and 12% to 15% more than Q1 revenue, based on statements made during the conference call.
This is a substantial increase in its business. I suspect that analysts now are redoing their outlook for the company as a result.
For example, according to Seeking Alpha, analysts now expect to see profits during 2022. The average forecast is for 63 cents earnings per share (EPS) for the year ending December 2022.
On top of this, the company projects that its adjusted EBITDA losses will fall dramatically. They will drop from $73 million in Q1 (which was better than expected) to just $35 million to $45 million. Moreover, this includes $25 million of expenses from its Autonomous Vehicle (AV) vehicle which it’s selling to Toyota’s Woven Plant company. So the “real” or adjusted EBITDA losses next quarter will be close to break-even, i.e., $10 million to $20 million.
This brings the company much closer to adj. EBITDA profits than before. I can see a situation where management may begin projecting profitable operations by the time it announces its Q2 earnings.
In fact, management implied this. Roberts said: “…we have strong conviction in our ability to achieve adjusted EBITDA profitability in Q3.”
What To Do With LYFT Stock
As a result, analysts are now starting to warm up to Lyft. Seeking Alpha reports that the average Wall Street target price among 39 analysts is $69.20. This represents a potential gain of 34% over May 18’s price of $51.51. Their report also indicates that 18 of these 39 analysts (46%) are Very Bullish on the stock.
Yahoo! Finance also indicates that the average price target is $69.35. Recently, Daiwa Capital upgraded its recommendation from Neutral to Outperform on LYFT stock.
As of today, LYFT stock is up 6.21% year-to-date. It is down from $67.42 on March 15 and $63.40 on April 28. Therefore, I suspect that it is probably at an inflection point.
How high can it go? Analysts expect profitability to skyrocket by 2023 and 2024. EPS estimates are $1.82 for 2023 and $2.71 for 2024. At 35 times 2024 EPS, the stock could rise to $95.20.
That is a gain of 84.8% over two years (investors look forward one year). The investor can expect to make 35.9% annually on a compounded basis. That is a pretty good return for most investors.
As a result, contrarian and value investors are likely looking at LYFT stock now as it looks like good value here. As growth rises, Lyft will make more money. Look to make at least 36% annually with Lyft stock each year over the next two years.
On the date of publication, Mark R. Hake did not hold a long or short position in any of the securities in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Mark Hake writes about personal finance on mrhake.medium.com and runs the Total Yield Value Guide which you can review here.