What Happened?
Shares of ride sharing service Lyft (NASDAQ: LYFT) jumped 5.3% in the afternoon session after the company announced a partnership with Amazon and AI startup Anthropic to develop artificial intelligence tools for customer care. It noted that some of its existing AI deployments have drastically reduced customer service resolution times. Jason Vogrinec, executive vice president of platforms at Lyft, added, "We see AI as an opportunity to improve the quality and effectiveness of our operations, not to reduce headcount.".
After the initial pop the shares cooled down to $14.06, up 4.7% from previous close.
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What The Market Is Telling Us
Lyft’s shares are very volatile and have had 29 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 12 months ago when the stock gained 37.7% on the news that the company reported strong fourth-quarter results indicating growing users, enabling it to beat Wall Street's revenue and EPS estimates. Rides growth accelerated for the fourth quarter in a row to 26% year on year in the quarter.
Guidance for Q1 2024 came in ahead of expectations for gross bookings (from which the company generates revenue by taking a cut) and adjusted EBITDA, showing that both near-term growth and profits are better than expected.
Lastly, the company expects to generate positive free cash flow for the full year 2024, converting roughly half of its forecasted full-year EBITDA into cash. This is a nice milestone. Interestingly, the initial company release had a typo. Instead of guiding to a 50 basis point (0.5 percentage points) increase in 2024 adjusted EBITDA, the text stated 500 basis points (5 percentage points). This caused the stock to spike up 65% in after-hours trading before settling down. Holding aside the stock move caused by the typo, it was still a very good quarter, and the stock is currently reflecting this.
Lyft is up 3% since the beginning of the year, but at $14.06 per share, it is still trading 30.7% below its 52-week high of $20.28 from March 2024. Investors who bought $1,000 worth of Lyft’s shares 5 years ago would now be looking at an investment worth $296.50.
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