Lyft Inc. is facing its largest single-day decline after forecasting lower profits than expected and announcing its plan to cut prices to attract and retain customers. The ride-hailing company projected adjusted earnings before interest, tax, depreciation and amortization of $5 million to $15 million for the quarter, missing the average estimate of $83.6 million. In response, shares of the company plummeted 32% in early trading on Friday, putting it on track for its biggest decline since its initial public offering four years ago.
Lyft has struggled to regain its pre-pandemic ridership levels and retain customers on its platform, in stark contrast to its rival Uber Technologies Inc., which saw a 31% increase in ride bookings in the fourth quarter. The company has reduced its base prices for rides and is now focusing on cost-cutting measures, including reviewing adjustments to the business, to increase growth and profitability.
Lyft's co-founder and CEO, Logan Green, acknowledged the need to prioritize competitive service levels and stated that the company is willing to take the hit to profits in order to be competitive on price and wait times. The slower revenue growth is largely due to seasonality and a decrease in usage of bikes and scooters, which make up a large portion of its rider base, during colder months. The company is working to increase customer retention through the expansion of its subscription product, Lyft Pink, and its advertising unit, which was launched last year.
Despite the lower earnings, there were some positive developments for Lyft in the fourth quarter. The company reported a 21% increase in revenue to $1.18 billion, beating expectations, and a 11.5% rise in revenue per rider. However, the 20.4 million active riders in the quarter were still two million below the company's base of 22.9 million at the end of 2019. Lyft co-founder and President John Zimmer stated that the company is seeing growth in the right direction but did not specify whether it was losing market share to Uber.
