Hit hard by the coronavirus pandemic, Lyft sees a light at the end of the tunnel for its ridehailing business.
The mobility firm said in a filing on Tuesday that Lyft rides increased by 26% in May compared to April, thought they were still down 70% year over year. Lyft (LYFT) - Get Report shares were rising 10% on Wednesday to $34.97.
In the filing, the company noted that growth was stronger in cities where stay-home orders have eased and businesses have reopened. Some of those cities include Austin (73% sequential growth), Denver (41%) and Nashville (64%). And rides overall have ticked up for seven consecutive weeks since April 12, Lyft said.
Wedbush analyst Dan Ives called the update an "incremental positive step," but cautioned that it'll take a long time for ridehailing to fully recover.
The improvement in rides seems to be largely driven by recreational trips on the weekends -- but commuting or work trips, as well as airport rides, could take a much longer time to fully recover.
"It's still a slow thaw, and with multiple macro levers over the course of the year, and likely an even longer return to normal environment, including business travel, there's still a long road ahead for rideshare," Ives said.
For the current quarter, he expects year-over-year rides to be down 63% year-over-year. Revenue per ride will increase by 18%, however, owing to fewer promotions. Ives raised Wedbush's price target on Lyft shares to $38 from $36.
Outside of its core ridehailing business, Lyft also reported that bike rides -- perhaps driven by an aversion to public transit and shared rides -- increased 118% in May compared to April.
The coming months could bring more consolidation in the mobility sector, inclusive of ridehailing and newer options such as on-demand bikes and scooters. And they will also put their business models to the test, according to Pitchbook analyst Asad Hussain.
"The pandemic will not only test the viability of these business models, but also the ability of management teams to weather the downturn," Hussain said. "Efforts to right-size businesses to the new market will likely drive significant consolidation and deal making. Uber’s deal with Lime to offload Jump, and its bid to acquire GrubHub, may only signal the early rounds of a longer-term industry shakeout."
Both Lyft and Uber have made significant layoffs in response to the pandemic.
In late April, Lyft laid off 17% of its staff and furloughed hundreds more as part of an effort to offset a steep drop in rides last quarter.
Rival Uber (UBER) - Get Report has also executed multiple layoffs over the past few months, and is in talks to buy Grubhub (GRUB) - Get Report to expand its food delivery business amid a coronavirus-related slump in rides.
Lyft shares have fallen roughly 20% year to date.