Lyft is raising prices — and it’s going to hurt when you need it most (LYFT)
- Lyft said Wednesday that it began raising prices in some places at the end of June.
- The company reported second-quarter earnings that blew past Wall Street expectations, and the fare hikes will likely help that continue.
- Executives didn’t say which cities or routes are seeing the raised rates, but the changes will affect places where demand won’t be hurt.
- That likely means they’ll be times when you have no other transportation option, or on really popular routes.
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Lyft fares are getting more expensive, the company admitted Thursday, and the price increases are likely going to hurt your wallet when you most need a ride.
“Our guidance incorporates modest price adjustments that went live towards the end of June,” Brian Roberts, Lyft’s chief financial officer, told investors on a conference call following the company’s second quarter earnings that handily topped expectations.
“More specifically, we began to adjust prices on select routes and in select cities based on costs and demand elasticities.”
That last bit, demand elasticities, is key. Lyft is likely not going to raise prices on routes where people might be dissuaded to take another form of transportation. Instead, it will probably mean higher fares at times when you have no other choice, or when the route is so popular that the company can do without the fraction of people who might be turned off by the surge.
When pressed for details, executives offered little insight into which cities or routes in particular were seeing the hiked fares.
“We try to pick routes in cities where the demand impact would be the smallest,” Roberts said, adding once again that Uber is likely doing much of the same. The companies now seem to be competing for customers based on ride-quality — things like speed, experience, and more — instead of using coupons to bait riders.
The price increases had little effect on the quarter, since they went into effect so late in June, but they could help the company’s third quarter be even better. As such, many Wall Street analysts raised their price targets or upgraded the stock.
“We see continued opportunities for per rider monetization improvement as prices and utilization increase over time,” Daniel Ives, an analyst at Wedbush, said in a note to clients. He upgraded the stock to an “outperform” rating from “neutral” following the second-quarter results.
Shares of Lyft gained more than 6% in trading Thursday following the earnings report. Uber, Lyft’s much larger competitor, is scheduled to report its own results on Thursday after markets close.
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