Stock Analysis

Retail Investors own very little of Lyft (NASDAQ:LYFT) - but that could change after strong third quarter results

  •  Updated
NasdaqGS:LYFT
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Lyft’s (NASDAQ:LYFT) share price rose sharply on Wednesday after the company reported better than expected third quarter earnings numbers. Not only did Lyft outperform on the top and bottom line, but margins and revenue per rider improved too.

Highlights from Q3 results:

  • GAAP EPS of -$0.21 versus -$0.58 expected
  • Revenue of $864.4 million up 73.0% Y/Y and $3.65 million better than expected.
  • Second consecutive quarter of positive EBITDA.
  • Net loss of $71.5 million compared to $252 million loss in the previous quarter.
  • 18.9 million active riders, up from 13.5 million in the second quarter. 
  • Revenue per active rider reached a record $45.63.
  • Fourth quarter guidance raised to revenue of $930 to $950 million, up from $969 million consensus. EBITDA guidance raided to $70 to $75 million compared to $64 million consensus.

The latest results reflect a rapid recovery for Lyft and will likely shorten the path to profitability. Ahead of these results our valuation model (take a look here) suggested that if analysts were on the right track the stock was potentially undervalued. Estimates are now likely to rise and lead to renewed interest in the company. We decided to have a look at the ownership structure to see what it may mean for the stock price.

View our latest analysis for Lyft

Lyft has a market capitalization of US$16b, so it's too big to fly under the radar. We'd expect to see both institutions and retail investors owning a portion of the company. Taking a look at our data on the ownership groups (below), it seems that institutions are noticeable on the share registry. We can zoom in on the different ownership groups, to learn more about Lyft.

ownership-breakdown
NasdaqGS:LYFT Ownership Breakdown November 3rd 2021

What Does The Institutional Ownership Tell Us About Lyft?

Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.

Institutions own the lion’s share of Lyft shares at 83.9% This suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at Lyft's earnings history below. Of course, the future is what really matters.

earnings-and-revenue-growth
NasdaqGS:LYFT Earnings and Revenue Growth November 3rd 2021

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. We note that hedge funds don't have a meaningful investment in Lyft. Our data shows that FMR LLC is the largest shareholder with 14% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 9.4% and 6.7%, of the shares outstanding, respectively. Furthermore, CEO Logan Green is the owner of 1.7% of the company's shares.

Insider Ownership Of Lyft

The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. The company management answers to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.

Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.

We can report that insiders do own shares in Lyft, Inc.. Insiders own 3.9%, or US$608m worth of shares (at current prices). It is good to see this level of investment. You can check here to see if those insiders have been buying recently.

General Public Ownership

With a stake of less than 3%, the general public has an unusually low ownership of Lyft. This isn’t entirely surprising as Lyft has been adversely affected by the Covid-19 pandemic while other growth stocks favored by retail investors have performed far better.

The fact that retail investors own so little of Lyft, combined with improving fundamentals, could lead to a substantial increase in demand for shares. If institutions are reluctant to sell at current levels, this could result in a fair amount of upward pressure on the share price.

Next Steps:

In this post we have highlighted one aspect of Lyft. There are of course several other factors to be aware of, in particular forecasts, valuation and transactions. Now that the company has reported better than expected results, it’s likely that analysts will raise their forecasts - and this in turn will affect the intrinsic value. You can track all these factors with our free analysis of Lyft which is updated daily.

NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.

Valuation is complex, but we're helping make it simple.

Find out whether Lyft is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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Simply Wall St analyst Richard Bowman and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

Richard Bowman

Richard Bowman

Richard is an analyst, writer and investor based in Cape Town, South Africa. He has written for several online investment publications and continues to do so. Richard is fascinated by economics, financial markets and behavioral finance. He is also passionate about tools and content that make investing accessible to everyone.

About NasdaqGS:LYFT

Lyft

Lyft, Inc. operates a peer-to-peer marketplace for on-demand ridesharing in the United States and Canada.

The Snowflake is a visual investment summary with the score of each axis being calculated by 6 checks in 5 areas.

Analysis AreaScore (0-6)
Valuation3
Future Growth1
Past Performance0
Financial Health3
Dividends0

Read more about these checks in the individual report sections or in our analysis model.

Fair value with mediocre balance sheet.