Shares of ride-hailing company Lyft LYFT have not had a good time on the bourses lately, plunging 13.4% in the past 30 days. The double-digit decline has resulted in LYFT underperforming the Zacks Internet—Services industry, rival Uber Technologies UBER, and fellow industry player DoorDash DASH in the same timeframe.

1-Month Price Comparison

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Currently trading at $11.48, the stock rebounded 28.6% from its 52-week low of $8.93. However, it still reflects a discount of 84% from its 52-week high of $20.82. LYFT shares have plummeted 52% over the past five years.

LYFT stock is trading below its 14-day and 50-day moving averages, indicating potential weakness in the stock's momentum.

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Given the significant pullback in LYFT shares currently, investors might be tempted to snap up the stock. But is this the right time to buy LYFT stock? Let’s find out.

Tariff Tensions Weighing on LYFT Stock

Concerns pertaining to the ongoing trade war are hurting the shares of this ride-hailing company. Of late, U.S. markets have been characterized by a high degree of volatility amid uncertainty surrounding U.S. trade policy and growing anxiety about a slowing U.S. economy. Fears of a slowdown in the economy are detrimental to companies like LYFT, whose health is tied to that of the broader economy.

This trade war is expected to result in a further increase in volatility and uncertainty going forward. The volatility level represented by the CBOE Volatility Index, also known as the fear gauge, has increased significantly over the past month.

President Donald Trump’s recent statements that the economy is in a “period of transition” amid escalating trade tensions led to a brutal sell-off, with Lyft declining 7.5% on March 10. The sell-off has given rise to recessionary fears, which are likely to hit the ride-sharing market by resulting in a slowdown in the gross bookings environment.

Lyft Q4 Revenues Lag Expectations, Gross Bookings View Weak

Last month, Lyft reported mixed fourth-quarter 2024 results. Even though earnings per share exceeded expectations, revenues lagged the same. Lyft's adjusted earnings per share of 30 cents surpassed the Zacks Consensus Estimate by 30.4%, reflecting a 58% year-over-year increase. Operating revenues rose 26.6% year over year to $1.55 billion but lagged the consensus mark.. 

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At the time of releasing fourth-quarter results, management stated that it expects gross bookings between $4.05 billion and $4.20 billion in the first quarter of 2025. The Zacks Consensus Estimate at that time was a much higher $4.26 billion.

Despite the earnings beat, Lyft shares declined significantly after the release as the company warned that the prevalent lower pricing trends are expected to continue in 2025 as it tries to match prices offered by rival Uber. In a bid to remain competitive, Lyft is working on luring customers and drivers onto its platform by keeping prices competitive and launching new differentiating features. Due to the innovations introduced by LYFT to attract drivers and riders, management stated on the conference call that drivers are spending more time with Lyft than before. 

LYFT’s High Debt Load: Another Concern

We are also concerned about LYFT’s high debt levels, despite efforts to reduce the same. The company’s times interest earned ratio was 1.9 at the end of 2024, much lower than industrial levels.  A lower times interest earned ratio often means that a company faces a greater risk of defaulting on its debt obligations. This implies serious financial problems.

Long-Term Debt to Capitalization  

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LYFT Trading at a Discount

From a valuation perspective, LYFT is trading relatively cheaply. LYFT is currently trading at a forward sales multiple of 0.71, below its median of 2.93 over the last five years and also at a discount compared with the industrial levels. The reading also compares favorably to its rival Uber.

LYFT’s P/S F12M Vs. Industry & UBER
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End Note

No doubt, LYFT is attractively valued, and its ambitions to be a key player in the lucrative and emerging autonomous vehicle market bode well, one should be mindful of the trade tensions and other economic challenges that have resulted in its disappointing price performance. To combat the headwinds, LYFT is restructuring its operations and cutting costs. Financial problems highlighted by its low times interest earned ratio is another challenge. Considering all this, we believe that it is not at all advisable to buy this Zacks Rank #3 (Hold) stock until the company demonstrates substantial improvement in its performance. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

We believe investors should monitor the company’s developments closely for an appropriate entry point. For those who already own the stock, it will be prudent to stay invested. The stock’s Zacks Rank supports our thesis.

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This article originally published on Zacks Investment Research (zacks.com).

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