Lyft and Apple Report Earnings Soon -- Pivotal Moments For Both Companies?

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Lyft (LYFT) - Get Report is an unprofitable upstart while Apple (AAPL) - Get Report is a mature cash cow with an indubitable future.

They both report earnings Oct. 30 and they both are looking at potentially pivotal quarters.

Lyft is looking to prove to Wall Street it's on a path to profitability, and the report could provide evidence that the ride-share company is on its way. Or not.

For Apple, its hardware business may no longer be a growth engine, but all indications are that iPhone sales are moving back to growth. More important, with each quarter investors increasingly expect more clarity on the services business, Apple's true growth driver.

Wall Street Warms to Lyft 

First off, the stock is up 9% to $44.09 in the past two days. This comes after management told the media that it expected to be profitable based on adjusted earnings before interest, tax, depreciation and amortization by Q4 2021. Analysts were expecting Lyft to be Ebitda-positive by 2022.

Moreover, analysts are already beginning to explicitly price in this profitability.

"We're expecting strong results and view this coming quarter as another step forward towards regaining investor credibility for Lyft," Wedbush Securities analyst Dan Ives wrote in a note. Ives said "this clearer path to profitability will help boost sentiment, as not long ago investors were questioning whether Lyft would ever be profitable."

Ives increased his 2021 EBITDA estimate from negative $280 million to negative $150 million and sees EBITDA turning positive to $150 million for the full year of 2022.

Tellingly, he introduced a discounted-cash-flow valuation model, which provides precise estimates for a company's truest form of profitability: free cash flow. "Our DCF analysis supports our long-term positive outlook on Lyft," Ives said.

The main factors Ives sees driving profitability are higher prices, higher revenue per rider and a slimmer cost structure. While total riders grow, Ives says, revenue per rider should rise 7% yearly for the next 10 years. Meanwhile, Ives sees operating costs becoming a lower percentage of revenue over that timetable.

Lyft is trading well below its initial public offering price of $72. It's currently valued at roughly 3 times next year's revenue, relatively low for a growth stock.

Ives has a $75 price target. Cowen & Co.'s John Blackledge on Friday published a note that reiterated his $84 price target.

Pivotal Quarter for Apple?

Apple stock is near its all-time high. It's currently trading at $245 a share.

While any investor excited about the stock is likely excited about services, hardware remains about half of revenue.

Analysts, and CEO Tim Cook, said throughout the third quarter that new iPhone 11 sales are looking strong. On Friday, Cowen analyst Krish Sankar wrote in a note: "The iPhone 11 product cycle and Q4 builds are off to a solid start."

Analysts polled by FactSet are looking for iPhone sales of $32.77 billion. Full-year iPhone sales are expected to contract 15% year over year, but to contract less than 1% in 2020 and grow 3.5% in 2021. Investors won't mind seeing iPhone sales show strength as a positive indicator.

As for the high-growth, high-margin services, which some analysts say still are not fully reflected in the stock, Sankar says Apple could introduce more precise numbers.

For services, management could do the following:

"AAPL breaks down services revenue and profits with and without AAPL TV+ impact to get a better insight into the 'core Services' and 'media driven services' trends," Sankar said. 

Investors are growing more keen on looking for positive services trends, especially as Apple rolls out Apple TV Plus.