Earnings preview: Ridesharing costs to hurt Lyft in Q2

Lyft Inc. (NASDAQ: LYFT) is set to release its second-quarter earnings results on Wednesday, August 7, after the market close. This is the second time that the company issues results since going public. The results will be hurt by the increase in spending on promotions and driver incentives for bolstering market share in the ride hailing space.

The bottom line will be impacted by an increase in operating costs like research and development, sales and marketing, general and administrative. Also, regulatory pressures from local governments and drivers demand are expected to increase costs significantly for Lyft. However, the company generates substantially all of its revenue from its ridesharing marketplace.

Ride-hailing companies like Lyft depends and takes advantage on the increase in the spending of US households on transportation than on any expenditure other than housing, according to the US Bureau of Labor Statistics. Consumers spend over $1.2 trillion annually on personal transportation in the US.

Lyft anticipates continued challenges from current competitors as well as from new entrants into the Transportation-as-a-Service (TaaS) market. The current competitors include Uber Technologies (NYSE: UBER), Gett (Juno), Via, Jump, Lime, and Bird. The company expects the demand of its offerings to continue to grow due to the convenience, experience and affordability of using Lyft.

The company continues to invest in the expansion of its scooter network and has expanded into shared bikes with its recent purchase of Bikeshare Holdings LLC, or Motivate. Also, Lyft is investing in autonomous vehicle technology, which is likely to be a critical part of the future of transportation. The organic investments and acquisitions of complementary businesses are the key focus of the company for the future growth.

Analysts expect the company to report a loss of $1.41 per share on revenue of $808.31 million for the second quarter. In the previous first-quarter, the company has missed the estimates as the bottom line was wider than the analysts’ expectations. Investors expect Lyft to report wider-than-expected quarterly loss for the second quarter.

Also read: General Motors Q2 earnings

For the first quarter, Lyft reported a wider loss due to stock-based compensation and related payroll tax expenses, primarily due to RSU expense recognition in connection with its initial public offering. However, revenues jumped by 95% driven by the increased demand for its network and multi-modal platform, as Active Riders grew 46%.

For the second quarter, Lyft expects total revenues in the range of $800 million to $810 million and adjusted EBITDA loss in the range of $280 million to $270 million. For fiscal 2019, the company predicts total revenue in the range of $3.275 billion to $3.3 billion and adjusted EBITDA loss in the range of $1.15 billion to $1.175 billion.

Lyft’s rival Uber Technologies will be reporting its second quarter earnings results on Thursday after the market close. Analysts expect the company to report a loss of $3.20 per share on revenue of $3.39 billion for the second quarter.

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