Wednesday, November 11, 2020

Lyft Drives Sentiment with Outlook, Despite Q3 Loss

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News shaping
the markets today

     

What’s happening: Shares of Lyft Inc gained in extended trading on Tuesday despite the ride-sharing service missing earnings expectations for the third quarter.

What happened: Lyft suffered a massive blow to its ride-hailing business earlier this year, as people avoided travelling amid the pandemic.

Lyft, along with rival Uber, witnessed some improvement in its business during the latest quarter. However, the pandemic impacted Lyft much more due to its lack of a delivery program like Uber.

How were the results: The San Francisco-based company reported a year-over-year decline in revenue, while its losses narrowed in the third quarter.

  • Revenues contracted 48% to $499.7 million, exceeding the consensus estimate of $487.4 million.
  • Net loss came in at $1.46 per share, down from $1.57 a share in the same quarter last year. However, this fell short of the consensus view of a loss of 91 cents per share.

Why it matters: Lyft kept up its tradition of beating revenue expectations, which it has done for the past six quarters.

Although Lyft’s business contracted compared to last year, investors cheered the company’s growth on a sequential basis (versus last quarter). While revenues grew 47% versus the second quarter, the company’s active riders rose 44%.

Investor sentiment was also lifted by Lyft’s plans to launch a food delivery service to offset the significant decline in revenues due to the downturn in its ride-hailing business. Although a complete recovery in Lyft’s performance is largely dependent on the pandemic being curtailed, management expressed optimism regarding the company achieving adjusted profits by the end of 2021. 

Lyft scored a significant win last week as voters in its home market of California passed Proposition 22. This will enable Lyft and Uber to categorise their ride-hail drivers as contractors, rather than employees, who are entitled to health insurance and unemployment benefits.

How shares responded: Lyft’s shares rose 5.3% to $37.96 in after-hours trading on Tuesday following the release quarterly results. Although the stock has gained 16% over the last three months, it is still down around 16% year to date.

What to watch: With the company’s recovery mostly dependent on the virus containment, investors will keep an eye on covid-19 daily cases in the US. Markets will also look out for updates on Lyft’s food delivery business.

The Markets Today

     

European stocks will be in focus today, ahead of the speeches by various members of the ECB (European Central Bank).

Context: European stocks extended the previous session’s gains to close higher on Tuesday on hopes of an effective covid-19 vaccine.

Details: The positive momentum on Tuesday was followed by a rally in global markets in the previous session, after Pfizer and BioNTech announced that their coronavirus vaccine candidate has achieved a milestone of being more than 90% effective in preventing covid-19. The results were interim data from a Phase III study.

Market sentiment was also supported by hopes of the US announcing a fresh stimulus plan soon, with Joe Biden winning the Presidential election.

The pan-European Stoxx 600 rose around 0.1% on Tuesday with banking stocks leading the gains. However, tech stocks bucked the overall market trend, falling around 2%.

London’s FTSE 100 gained 1.8%, while Germany’s DAX 30 moved higher by 0.5% on Tuesday. Meanwhile, French 40 climbed by 1.55%.

What to watch: Markets will focus on the stimulus announcement from the US as well as the rising coronavirus cases globally, with the total surpassing 51.3 million. Investors will also keep a close eye on the speeches from ECB’s President Christine Lagarde, Vice-President Luis de Guindos, and chief economist Philip Lane.

Other Markets: US indices closed mixed on Tuesday, with the Dow Jones index gaining 0.90%. However, the S&P 500 and Nasdaq 100 lost 0.14% and 1.37%, respectively.

Support & Resistances
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Futures at 0400 (GMT)

What else to watch today

     

Brazil's retail trade, Mexico’s industrial production, Russia’s balance of trade as well as the US MBA mortgage applications.