Lyft stock dropped 30% as result of company’s poor guidance

The stock of Lyft dropped 29.9% on Wednesday, as investors expected the firm to face short-term hurdles.

After the bell on Tuesday, Lyft posted better-than-expected top and bottom-line results. However, due to rising gas prices, the company provided light second-quarter guidance and said it would have to continue spending on driver incentives, sending shares tumbling. It’s unclear how much the company intends to invest or if it will do so in the second half of the year.

In addition, the company will invest in marketplace technology and brand promotion.

“We believe the softer near-term outlook, need to increase investments, and numerous macro headwinds are likely to weigh on shares in the near-term, causing us to move to the sidelines,” Susquehanna analysts said in a note Wednesday that downgraded the stock.

Nonetheless, other analysts claimed in notes released after the publication that the sell-off was exaggerated.

“There’s no room for error in this environment, but still, this selloff seems overdone,” Piper Sandler analysts said in a Tuesday note. “We can understand why the stock is lower following the Q1 call (namely: disappointing EBITDA guidance), and we are cutting our price target to reflect sector-wide multiple compression and lower conviction re: margins. But still, we would buy this post-Q1 weakness,” the analysts added.

While tempered revenue and outlook are hurting on shares, Canaccord Genuity stated in a note Tuesday that “the demand picture is clearly improving along with driver availability.”

“This marketplace balance will likely drive prices lower, volumes higher, and lead to robust growth for the balance of the year, a dynamic that should help the stock appreciate out of COVID-inflicted value territory,” the analysts said.

For the latest Business News Follow BOL News on Google News. Read more on Latest Business News on oldsite.bolnews.com