Ride-hailing and delivery company Lyft (NASDAQ:LYFT) continues to disappoint investors on multiple fronts. LYFT stock is down 63% year to date and trading 78% below its initial public offering (IPO) price of $72 per share from March 2019. Currently, shares sit just above their all-time low.
The San Francisco-based company reported weak first-quarter results and a disappointing outlook for the current quarter. It has also been buried under a mountain of legal and political battles.
The erosion of LYFT stock has been steady and prolonged, with no signs of a turnaround in sight. Dip buyers who purchase Lyft stock at its current distressed level are likely to be frustrated as the share price continues to fall in the coming weeks and months.
Lyft Looking to Cut Costs
The latest news from Lyft is that the company is slowing hiring this year and reassessing its budgets as it looks to cut costs amid deteriorating macroeconomic conditions and a “dramatic change in investor sentiment.” While Lyft said it has no intention of laying off employees right now, talk of the cost-cutting measures only added to the poor sentiment investors have toward the company and LYFT stock.
The news of cost cuts came three weeks after Lyft issued yet another disappointing earnings report and underwhelming forward guidance. The company reported a net loss of $196.9 million, which was 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 numbers continue to decline and have yet to recover to their pre-pandemic levels. For Q1, Lyft reported 17.8 million active riders, which missed analyst estimates and was 5% lower than the 18.73 million active riders 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. Plus, the company said it plans to continue spending heavily on driver incentives this year in an effort to entice people to work for the company as freelance operators as gasoline prices soar.
LYFT stock plunged 30% in a single day after earnings were released and is trading nearly 50% below where it was prior to the announcement.
Lawsuits and Political Battles Weigh on LYFT Stock
If poor financial results, cost cuts and a declining stock price weren’t bad enough, Lyft is also engaged in a growing number of legal and political battles over its business model that pays people less than minimum wage and provides no benefits.
The company recently agreed to pay $12.25 million and offer new protections to its drivers to settle a proposed class-action lawsuit regarding worker classification. In that suit, which is one of many Lyft is grappling with, drivers claimed they are employees rather than independent contractors and entitled to benefits that include reimbursement for their gas and vehicle maintenance expenses.
Lyft is also embroiled in political fights all over the world, from the U.S. and Canada to Europe and Asia, as politicians take issue with the company’s labor practices and try to legislate change.
The legal and political fighting is expensive and time-consuming, with some analysts noting they are a growing distraction for the company. In November, Lyft named a new legal chief to help it manage the ongoing litigation around the world related to its classification of drivers. Attorney Lindsay Llewellyn has been tasked with building a legal team that can help Lyft manage consumer class actions, competition issues, insurance coverage disputes and regulatory issues.
Don’t Buy LYFT Stock
For Lyft shareholders, there just doesn’t seem to be any good news. A search on the company will result in a flood of headlines about financial losses, a plunging share price, hiring freezes, class-action lawsuits and political barnstorming. It all adds up to a giant cloud of negativity that is dragging Lyft’s share price lower.
Given the myriad of problems impacting the company and its outlook, investors would be well-advised to steer clear and not try to catch this falling knife. LYFT stock is not a buy.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.