LYFT Inc (NASDAQ:LYFT) stock fell 1.53% (As on August 27, 11:52:14 AM UTC-4, Source: Google Finance) after Nomura upgraded the company to Neutral from Reduce with a $13 price target, down from $15. Lyft shares are down 22% year-to-date while peer Uber (UBER) is up 19%, and during this time, the cost cuts and operational overhaul executed by Lyft’s management in order to focus on improving profitability and staunching cash burn “have started to show results, the analyst tells investors in a research note.

Lyft’s management has implemented cost reductions and operational changes aimed at enhancing profitability and reducing cash burn. These efforts have borne fruit, as evidenced by Lyft’s achievement of positive free cash flow in the last three consecutive quarters. Notably, this financial improvement persisted even after excluding stock-based compensation in the last two quarters.

The analyst from Nomura/Instinet noted the company’s potential to remain robust in standard recessionary conditions, unaffected by pandemic lockdowns. A potential cooling of the job market is expected to increase driver availability and reduce ride costs, thereby encouraging usage of Lyft’s services, which are considered essential by many customers. The convenience of ride-hailing has also led to a growing reliance on such services.

Lyft’s CEO David Risher’s strategy of cutting costs, particularly in research and development, has been recognized as a transformative step for the company. This approach acknowledges Lyft’s smaller scale and competitive challenges but has turned the platform into a profitable, low-maintenance asset. Nomura believes proof of the company’s cash generation ability limits share downside risk amid the overhang from U.S. recession concerns. It views the stock as fairly valued.

Meanwhile, for the third quarter of 2024, the company expects gross bookings to be of approximately $4.0 billion to $4.1 billion and adjusted EBITDA to be in the range of $90 million to $95 million and an Adjusted EBITDA margin (calculated as a percentage of Gross Bookings) of approximately 2.3%.

For fiscal 2024, the company expects rides growth to be in the mid-teens year-over-year, Gross Bookings growth that is slightly faster than Rides growth year-over-year, Adjusted EBITDA margin (calculated as a percentage of Gross Bookings) to be of approximately 2.1%. The company remains on track to generate positive free cash flow for the full year. Given the strong progress in the first half of the year and increased visibility, the company now expect that it will reach the more than 90% long-term conversion target for the full-year 2024, well ahead of schedule.