SAN FRANCISCO: Lyft beat estimates for quarterly profit and says it will generate positive free cash flow for the first time in 2024, as it cut costs and became more competitive with larger rideshare rival Uber.

The company’s shares were up 17% in late after-hours trade on Tuesday, despite a major gaffe: Lyft’s said incorrectly in a statement that a key margin metric was expected to rise by 500 basis points this year. On a conference call later, chief financial officer Erin Brewer corrected the forecast to an increase of 50 basis points.

The stock had surged 67% based on the statement and lost most of the gains after the correction.

Roughly 47.8 million Lyft shares changed hands in after-hours activity, according to Nasdaq. That surpassed the stock’s average daily volume of about 13.6 million shares in the last 50 regular trading sessions, according to LSEG data.

“(The surge) included a significant amount of short covering from hedge funds who are heavily involved in shorting this name,” said Adam Ballantyne, senior analyst at Cambiar Investors, which holds Uber stock.

Roughly 13% of Lyft’s free-float stock were shorted as of Jan 31, verus a 3% short interest in Uber.

Jake Walker, a securities lawyer at Block & Leviton, said the mistake could spark lawsuits as investors tried to recover losses.

Still, as share gains settled late evening, investors focused on chief executive officer David Risher’s efforts to cut costs.

Risher, who took over the reins at Lyft less than a year ago, has driven aggressive restructuring, including eliminating management layers. The early efforts fuelled a 36% surge in Lyft stock in 2023.

“As we can drive our scale north and hold our costs flat, we’re going to drop more money to the bottom line,” Risher told Reuters in an interview.

Lyft cut total costs last year by 12%, from a year earlier, compared with a 28% surge in expenses in 2022.

Rides to stadiums grew more than 35% last year from 2022, mainly driven by Taylor Swift’s Eras Tour, Beyoncé’s Renaissance World Tour and other sporting events, Lyft said.

“The strong outlook indicates the ride-hailing company may finally be coming out of the woods,” said Jesse Cohen, senior analyst at Investing.com. Uber shares rose 2% after Lyft’s results.

Lyft retained its 29% market share in the fourth quarter, fending off Uber by keeping prices competitive, according to market analysis firm YipitData. Though Uber dominates the industry, analysts believe Lyft will remain a strong second player.

Lyft’s gross bookings grew 17% to US$3.7bil in the fourth quarter. It expects between US$3.5bil and US$3.6bil in gross bookings in the March quarter, above analysts’ estimates of US$3.45bil.

Earlier this month, Uber posted its first annual net profit as a public company as gross bookings and user retention improved, and it benefited from initiatives like memberships, corporate travel and advertising.

Risher, too, said on Tuesday growth this year would be driven by partnerships with companies including LinkedIn and Starbucks.

Last week, Lyft, which has a strong presence on the US West Coast, announced it would pay the difference if drivers made less than 70% of what riders paid after external fees every week.

Lyft forecast current-quarter adjusted earnings before interest, taxes, depreciation and amortisation of US$50mil-US$55mil, higher than expectations of US$46.3mil.

The company’s revenue rose 4% to US$1.22bil in the quarter ended Dec 31, in line with analysts’ estimates.

 - Reuters