D.A. Davidson Senior Research Analyst Tom White sits down with Yahoo Finance Live to talk about Lyft's third-quarter earnings miss, project development as the ride-share company competes with Uber, and inflation.

Video Transcript

SEANA SMITH: We want to talk a little bit more about these latest results. For that, we want to bring in Tom White, DA Davidson senior research analyst. So Tom, just your first reaction to the numbers that we're just getting and then the stock's reaction, off nearly 9%, now off just over 8%.

TOM WHITE: Yeah, look, I view this quarter as kind of a bit of a continuation from what we've seen from Lyft over the last few, which is, they're getting to expectations on EBITDA and some of the profit metrics, which is a positive. But the top line is not really overly impressing.

I think the reporter who just spoke hit the nail on the head when she called out the active riders number. It's a bit tepid, and basically, it just shows that Lyft is doing a pretty good job kind of extracting maximum revenue out of the riders that do use the service, but it's not really overachieving when it comes to just reaching a larger and larger kind of proportion of the active riders that even used the platform pre-pandemic.

So, you know, I think it's-- I'd call it a mixed quarter. The revenue numbers were, more or less, in line. Maybe a smidge below the Street, but they were in line with the guidance. And then they gave a little bit of upside on EBITDA. But, you know, I think that the Street's reacting a little bit to the fact that the beat here is really kind of driven more by cost cuts and then really kind of minding their P's and Q's on expenses, rather than real kind of revenue stream.

RACHELLE AKUFFO: And Tom, speaking of that, Lyft expected to cut 13% of its staff as they brace for economic slowdown. How much tougher of a position, though, is Lyft than Uber, which has a range of other businesses attached outside of its ride hailing business.

TOM WHITE: Yeah, look, you know, I think we're pretty firm believers that over the long-term, there are real benefits to having a multi-product kind of local commerce marketplace business, right? As we know, Lyft is really a pure play about ride sharing. There's been talk about them maybe doing something and kind of be the delivery space.

But for all intents and purposes, this is really a pure play on ridesharing. Uber's got multiple products, lots of adjacent categories that we think just kind of builds this more liquid marketplace that attracts more consumers, which, in turn, attracts more drivers and kind of creates this nice network effect.

You know, I think Lyft, we're still sort of in the relatively early stages of this economic reopening. It's still possible that Lyft is kind of going to be able to kind of recreate that nice marketplace liquidity that it had kind of pre-pandemic. But it looks to be happening a little bit slower.

So what we saw from Lyft with the announcement on the cost cuts is just them basically facing that reality and trying to kind of wave the growth of the business with these kind of near and intermediate term targets that they've given to the Street, right? They've given that-- I think over a billion or at least a billion dollars in EBITDA in 2024 and over 700 million in free cash flow. It's really them trying to make sure that they can deliver on those 2024 targets, kind of regardless of what's happening in the broader kind of macro backdrop.

SEANA SMITH: Yeah, Tom, with the stock off just around 67% year to date, yes, they have announced cost cuts through those layoffs. But are more cost cutting measures needed in order to weather what will likely be a pretty challenging couple of quarters?

TOM WHITE: Yeah, look, I think it depends on what happens with kind of consumer demand and the impact of inflation. Obviously, none of us have a crystal ball. I think based on where the macro is now, it seems like Lyft thinks that they've made adequate changes and cuts to the business to be able to deliver on those targets that I touched on.

If we see a significant kind of further deterioration in consumer spending, on the impact of inflation, I still feel like there are levers that Lyft can pull to kind of further reduce costs somewhat. I think the number of levers that they have and probably their level of comfort in pulling those are probably dwindling a bit. But there's a lot of different areas probably in the core business, but also in some of the kind of adjacent products that they're exploring that could provide them a little bit more wiggle room in kind of trying to deliver against those EBITDA targets against a broad range of outcomes on consumer spending and just consumer demand for ride share.

RACHELLE AKUFFO: And Tom, in terms of breaking down some of those levers that Lyft might be able to pull, I mean, we heard from Logan Green, the co-founder and CEO, saying we've taken decisive steps to ensure that we can deliver profitable growth. And we're even more confident in our ability to achieve our 2024 financial targets. What sort of levers are they going to have to pull to really get them there?

TOM WHITE: Yeah, well, you know, I think one of the main focus areas tonight is learning a little bit more about the areas where they cut with their recently announced cut. Then we'll get a better sense of what areas were maybe impacted, what areas were relatively left untouched. But, you know, I think we need to get a little bit better sense of exactly kind of what areas were cut before we know exactly how many levers that they have. But that's something that we'll hopefully get some more color on, on the call tonight.

RACHELLE AKUFFO: Certainly expecting a lot more clarity. A big thank you there, Tom White of DA Davidson. Thank you for joining us with your insights.