Major Error Causes Stock Surge and Subsequent Correction
Lyft CEO David Risher has acknowledged responsibility for a significant error in the company’s fourth-quarter earnings release, stating on CNBC’s “Squawk Box” that it is “super frustrating” for the entire team. The error led to Lyft shares soaring more than 60% after the report’s release, fueled by a statement in the press release that projected a 500 basis points (5%) margin expansion for 2024. However, during the investor call, Lyft CFO Erin Brewer clarified that the figure was incorrect and that the actual increase would be 50 basis points (0.5%), resulting in Lyft’s adjusted profit margin reaching 2.1% this year, up from 1.6% in 2023.
Lyft CEO Acknowledges Fault and Prompt Correction
David Risher accepted responsibility for the mistake, stating, “Look, it was a bad error, and that’s on me.” He explained that the error, involving an extra zero in the press release, was identified quickly during the earnings call when interest in the margin became evident. Despite the correction, Lyft’s stock maintained some gains, beating analysts’ estimates, but lost a significant portion of its initial surge, equivalent to over $2 billion in market capitalization.
Lyft Ceo Talks Earnings Error ‘it’s on Me… Buck Stops With Me’
Financial Results and Stock Movement
Even with the correction, Lyft shares experienced a 35% jump on Wednesday, reaching $16.09, marking their best day since the company’s IPO in 2019. However, the stock remains approximately 77% below its debut price. Lyft CEO reported $1.22 billion in revenue for the quarter, a 4% increase from the previous year, with adjusted earnings per share at 18 cents, exceeding the expected 8 cents. Gross bookings for the year rose 14% to $13.8 billion, and quarterly bookings increased by 17% to $3.7 billion.
Positive Analyst Response and Raised Rating
Following the earnings release and subsequent correction, analysts at MoffettNathanson raised their rating on Lyft shares from sell to neutral, emphasizing the company’s “better-than-expected take-rates” and improved “cost discipline.” In a note titled “Lyft: We all make mistakes,” the analysts acknowledged their own error, citing a previous downgrade in October.
While the earnings error had a notable impact on Lyft’s stock, the positive financial results and the company’s ability to swiftly address and correct the mistake have contributed to a mixed sentiment in the market.
