Share buybacks and regional strategy: Lyft changes track

(MarketScreener with Reuters) The US ride-hailing specialist has posted strong results and, more importantly, provided a positive outlook for the future. With a clear strategy and a strengthened share buyback program, its share price rose 8% in after-hours trading yesterday.

On Thursday Lyft announced that it has increased its share buyback program by $750m, while exceeding Wall Street expectations for its Q1 adjusted earnings. The announcement sent shares up nearly 8% in after-hours trading.

A clear strategy

The ride-hailing company, which is aggressively expanding beyond major US cities, plans to use $500m of this authorization over the next 12 months. Lyft unveiled an initial buyback program in February, but did not specify a timeline.

The decision comes as activist investor Engine Capital recently urged the company to accelerate its buybacks to $750m and consider strategic options, including a sale. "The buyback reduces the number of shares outstanding and makes earnings per share more attractive," said Andrew Rocco, strategist at Zacks Investment Research.

Lyft reported a 13.5% increase in Q1 revenue to $1.45bn, slightly below the consensus estimate of $1.47bn according to LSEG. However, adjusted EPS came in at 24 cents, exceeding forecasts of 19 cents.

Markets to watch

While its main competitor Uber presented an encouraging outlook for Q2 on Wednesday, despite weaker demand in the United States, both groups are now focusing their efforts on secondary markets: medium-sized cities that are heavily dependent on private cars, which have limited public transport networks.

Lyft highlighted a 37% increase in rides in Indianapolis over the quarter, illustrating its strategy of conquering underserved markets. The company is also testing a taxi booking service in St. Louis and last month announced the acquisition of European company Freenow for approximately $200m, signaling its international ambitions.

"Building on our strong foothold in key markets, we are now turning our attention to regions with high car dependency and low public transportation density, which offer significant growth potential," Lyft said.

For Q2, the company expects gross bookings of $4.41bn to $4.57bn, in line with the estimate of $4.5bn. It also anticipates adjusted EBITDA of between $115m and $130m, in line with the consensus.