Lyft forecast gaffe jolts traders, could invite scrutiny
By Samrhitha A
(Reuters) — Lyft (NASDAQ:LYFT) shares surged more than 21% on Wednesday before the bell after the ride-hailing company said cost cuts would help it generate positive free cash flow for the first time in 2024 and posted market-beating quarterly profit.
Its results were overshadowed by an error on a key margin metric in the earnings statement that led to a 67% surge in its shares before a clarification from Chief Financial Officer Erin Brewer in a conference call with analysts.
«Since the error relates to a forecast, it's likely that liability under securities regulations will not attach unless it can be proved that it was made with knowledge that it was wrong or with some intent to mislead,» said Bobby Reddy, Professor of Corporate Law and Governance at the University of Cambridge.
Analysts said the surge could have included significant short covering from hedge funds. Lyft had short interest of $566.1 million, or 13.1% of its free float shares, as of Feb. 12, according to data and analytics firm Ortex.
Still, the stock jump set Lyft on course to add roughly $1 billion to its market value, based on its share price of $14.70, if premarket gains held.
CEO David Risher's push for aggressive restructuring has helped the company cut total costs last year by 12% compared with a 28% increase in expenses in 2022.
«David Risher took over as CEO less than a year ago, and he's clearly changed gears at the company, cutting costs sharply while still maintaining market share,» said Susannah Streeter, head of money and markets at Hargreaves Lansdown.
Lyft was trading at 20.27 times its 12-month forward earnings estimates compared with Uber (NYSE:UBER)'s 49.75.
Shares of rival Uber were also up more than 2%.
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