Since January 2025, Lyft has been in a holding pattern, posting a small return of 2.7% while floating around $14.33.
Is now the time to buy LYFT? Find out in our full research report, it’s free.
Why Does LYFT Stock Spark Debate?
Founded by Logan Green and John Zimmer as a long-distance intercity carpooling company Zimride, Lyft (NASDAQ: LYFT) operates a ridesharing network in the US and Canada.
Two Positive Attributes:
1. Active Riders Drive Additional Growth Opportunities
As a gig economy marketplace, Lyft generates revenue growth by expanding the number of services on its platform (e.g. rides, deliveries, freelance jobs) and raising the commission fee from each service provided.
Over the last two years, Lyft’s active riders, a key performance metric for the company, increased by 10.1% annually to 24.2 million in the latest quarter. This growth rate is solid for a consumer internet business and indicates people are excited about its offerings.
2. Increasing Free Cash Flow Margin Juices Financials
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
As you can see below, Lyft’s margin expanded by 23.3 percentage points over the last few years. This is encouraging, and we can see it became a less capital-intensive business because its free cash flow profitability rose more than its operating profitability. Lyft’s free cash flow margin for the trailing 12 months was 15.4%.
One Reason to be Careful:
Low Gross Margin Reveals Weak Structural Profitability
For gig economy businesses like Lyft, gross profit tells us how much money the company gets to keep after covering the base cost of its products and services, which typically include server hosting, customer support, and payment processing fees. Another cost of revenue could also be insurance to protect against liabilities arising from providing transportation, housing, or freelance work services.
Lyft’s unit economics are far below other consumer internet companies, signaling it operates in a competitive market and must pay many third parties a slice of its sales to distribute its products and services. As you can see below, it averaged a 34% gross margin over the last two years. Said differently, Lyft had to pay a chunky $66.03 to its service providers for every $100 in revenue.
Final Judgment
Lyft’s positive characteristics outweigh the negatives, but at $14.33 per share (or 11.8× forward EV/EBITDA), is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.
Stocks We Like Even More Than Lyft
Trump’s April 2025 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.
Take advantage of the rebound by checking out our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today.
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