‘Why not?’ Lyft CEO shakeup will get a Wall Street embrace

Shares of Lyft Inc. had been driving larger in premarket buying and selling Tuesday after the corporate introduced a management change that, within the view of 1 analyst, “couldn’t hurt.”

The ride-hailing firm has tabbed David Risher, an early Amazon.com Inc.
AMZN,
-0.19%
worker and a member of Lyft’s
LYFT,
+1.61%
board, to take over as chief govt. He replaces co-founder Logan Green, who will keep on the board. Another co-founder, John Zimmer, will maintain his board function as nicely however will depart his administration function of president.

“Couldn’t hurt, right?” RBC Capital Markets analyst Brad Erickson requested in a be aware to shoppers Monday. “Given the host of execution challenges the company has faced over the last few years, we think investors are likely to view this as a ‘why not try something different?’ moment where the risk/reward on Risher’s potentially fresh take on the business is arguably favorable.”

New Lyft CEO: ‘I don’t consider this as simply an Uber battle. It’s a battle in opposition to staying at house.’

The announcement comes as Lyft shares have dropped greater than 85% off their $72 preliminary public providing worth from 2019. The inventory slid greater than 36% after the corporate’s most up-to-date earnings report, which included a messy earnings forecast. It was forward greater than 5% in premarket motion Tuesday within the wake of Risher’s hiring announcement.

“Given recent stock performance and challenges, the ‘why now’ is understandable,” Bernstein’s Nikhil Devnani wrote. “This can be a positive change for the company as it looks to get back on track after a tough 2022.”

But Risher has a tough street forward of him. For one, he has to take care of the corporate’s “structural disadvantage” relative to Uber Technologies Inc.
UBER,
+0.33%,
which Erickson deems a significant problem for Lyft.

The “structural disadvantage” results in “a negative virtuous cycle for demand,” he wrote, and Lyft has additionally “struggled to handle two key larger expense items in driver incentives and insurance costs.”

“While we’ll await any further details on updated strategic priorities that come to light, we struggle to paint a picture for [Lyft] to actively improve its structural positioning relative to [Uber], and therefore we remain sidelined on the name,” he wrote.

Jefferies analyst John Colantuoni chimed in that he seems to be on the shakeup “favorably following recent underperformance.” While he’s “cautiously optimistic” that Risher might help enhance Lyft’s efficiency, he notes that Risher’s “impressive track record of execution at [Microsoft and Amazon]” was “more than two decades in the past.”

“Our caution stems from the new CEO’s apparent lack of recent, directly relevant leadership experience and the potential for further delay in the issuance of a new long-term Ebitda [earnings before interest, taxes, depreciation and amortization] target,” Colantuoni wrote. “We think investors will need to receive a new long-term Ebitda target before becoming constructive on the stock, and any delay in the issuance of that target is likely to preserve uncertainty and weigh on the stock in the near term.”

Bernstein’s Devnani wrote that the arrival of a brand new CEO “probably reduces the chances” that Lyft sells itself to a different on-demand platform, tech firm or automaker, one thing he says Wall Street has speculated about for a while.

“Overall, we’re taking a ‘TBD view’ of how impactful this transition will be — at least until we hear more about what’s to come from the new team,” he wrote.

Source web site: www.marketwatch.com

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