Transport and delivery company Lyft (NASDAQ:LYFT) continues to disappoint investors on several fronts. LYFT stock is down 63% year-to-date and has been trading 78% below its initial public offering (IPO) price of $72 per share since March 2019. just above their all-time low.
The San Francisco-based company announced weak first-quarter results and a disappointing outlook for the current quarter. He was also buried under a mountain of legal and political battles.
The erosion of LYFT stock has been steady and prolonged, with no signs of recovery in sight. Bearish buyers buying Lyft stock at their current distress level are likely to be frustrated as the stock price continues to decline in the weeks and months ahead.
Lyft is looking to cut costs
The latest news from Lyft is that the company is slowing hiring this year and reassessing its budgets as it seeks to cut costs amid deteriorating macroeconomic conditions and a “radical shift in investor sentiment.” Although Lyft has said it has no plans to lay off any employees at this time, discussions of cost-cutting measures have only added to the bad sentiment investors have towards the company and LYFT shares.
News of the cost cuts came three weeks after Lyft released another disappointing earnings report and disappointing forecast. The company reported a net loss of $196.9 million, an improvement from a loss of $427.3 million in the same period of 2021 when the global pandemic was still hurting its operations. .
However, the company’s ridership continues to decline and has yet to return to pre-pandemic levels. For the first quarter, Lyft reported 17.8 million active passengers, which missed analysts’ estimates and was 5% lower than the 18.73 million active passengers the company had in the fourth quarter of 2021.
For the second quarter, Lyft said it expects revenue of between $950 million and $1 billion, which was below Wall Street’s estimate of $1.02 billion. Additionally, the company said it plans to continue spending heavily on driver incentives this year in a bid to entice people to work for the company as independent operators as gas prices rise. soar.
LYFT stock plunged 30% in a single day after the earnings release and is trading almost 50% below its pre-announcement level.
Lawsuits and political battles weigh on LYFT stock
If poor financial results, cost cuts, and a declining stock price weren’t enough, Lyft is also embroiled in a growing number of legal and political battles over its business model that pays people less than minimum wage and doesn’t provide no benefit.
The company recently agreed to pay $12.25 million and offer new protections to its drivers to settle a proposed class action lawsuit over worker classification. In the lawsuit, which is one of many that Lyft is facing, the drivers claimed they were employees rather than independent contractors and were entitled to benefits including reimbursement for their gas expenses. and vehicle maintenance.
Lyft is also embroiled in political struggles around the world, from the United States and Canada to Europe and Asia, as politicians challenge the company’s labor practices and attempt to legislate change.
Legal and political fights are expensive and time-consuming, with some analysts noting they are a growing distraction for the company. In November, Lyft appointed a new chief legal officer to help it manage ongoing litigation around the world related to its driver classification. Attorney Lindsay Llewellyn has been tasked with building a legal team that can help Lyft handle consumer class action lawsuits, competition issues, insurance coverage disputes and regulatory issues.
Do not buy LYFT stock
For Lyft shareholders, there just doesn’t seem to be good news. A search for the company will result in a deluge of headlines about financial losses, falling stock prices, hiring freezes, class action lawsuits and political storms. This all adds up to a giant cloud of negativity that is dragging Lyft’s stock price down.
Given the myriad of issues plaguing the company and its prospects, investors would be well advised to stay away and not try to catch this falling knife. LYFT stock is not A purchase.
As of the date of publication, Joel Baglole had no position (directly or indirectly) in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com publishing guidelines.