Lyft Stock Isn't a Smooth Ride After Earnings, But This Low-Risk, High-Reward Trade Gives It Gas
However, not all investors want to focus their attention on the more established, $100 billion-plus types. So for those wanting to trade a nimbler ride-hailing company at my favorite time to trade – after earnings are released, not right before – LYFT is worth a look. Just don't expect strong shock absorbers.
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LYFT has done a nice job beating analyst estimates, as shown here.
Granted, $0.21 per share in annual earnings on a $14 stock produces a very high price-earnings ratio, and indications are that multiples will stay high for a while. But there is a growth story here, and nearly half of the last four quarters' earnings occurred in the just-reported quarter. That beta shown below is expectedly high, but a P/E-growth ratio of under 3x is a signal to me that this stock might just grow into that high earnings multiple. So this might be a bumpy ride, but investors won't fall out of the car.
Charting LYFT After Earnings
I see something I like and something I don't when assessing the daily and weekly charts of LYFT, shown below. The good stuff is in the daily, in the percentage price oscillator (PPO) indicator at the bottom. That is not what I'd call a 'buy' signal at all. However, you can see that it is trying to bottom, as is the stock following Wednesday's quarterly announcement. I don't see this as an instant-gratification situation, apart from the nice pop it had Thursday morning. But this is what I'd describe as 'showing signs' of turning up. Like I said, this one is not for the faint of heart. UBER is the established player in this space.
This is as good a time as any to follow up on that Eli and Peyton Manning reference I opened this article with. Peyton was an established top NFL quarterback by the time his younger brother Eli joined my hometown New York Giants. Eli had high expectations and for a long time was the 'other Manning brother' in the league.
However, after a mixed start to his career, Eli continued to improve, and ultimately led the Giants to a pair of Super Bowl wins. Both will be Hall of Fame inductees.
LYFT does not have to grow to the size of UBER to make investors money. And for traders, all it needs to do is to rise in price by another dollar or two. It's a $14 stock. And one that, while currently not a table-pounding buy, might just reward the patient trader.
Here's the weekly chart for LYFT. It's flat as a pancake. That's a good thing if a trader thinks the market will warm to this one soon. That said, the PPO is not encouraging.
Collaring LYFT
You know me: Have collars, will travel. And collaring a stock like LYFT is intriguing, since it is the type of stock that could accelerate quickly, be it from an event-driven situation or next quarter's earnings. So let's pick out one possible trade.
Here's what we have above. The strike prices of the collar are $14 for the put and $18 for the call. As a reminder, that means through the 12/19/25 expiration date, I can sell 100 shares of LYFT for $14. Even if it fell to half that, or even to zero (which is unlikely). This also gets me through the November earnings and about a month or so beyond. And I can get all the upside in the stock until $18, at which point if I want to make more on LYFT, I'd have to roll the collar, buy more stock, or buy call options.
The cost here is under 5% of the $14.39 LYFT price as of this writing. And that produces an upside potential of more than 20.4% versus a worst-case downside of only 7.4%. No matter who is 'manning' the driver's seat in LYFT vehicles.
On the date of publication, Rob Isbitts did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com
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