Tepid investor reaction clouds Lyft’s new strategy

The company's bet on a slimmer, more focused business echos tech's trend of doing more with less

Shares of Lyft are off sharply this morning, falling nearly 20% in early trading. The company’s equity is selling off in the wake of the U.S. ride-hailing giant’s first quarter results and its comments regarding the current quarter, and how its new strategic posture will affect its growth and economics in the coming quarters.

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In the wake of Lyft’s decision to remove its founders from day-to-day control, dramatically cut staffing and bring in an external CEO, the company is now a leaner organization under new management. However, while Lyft saw its valuation slashed after it reported its results and updated strategic posture, shares of Uber have risen sharply in the wake of its own earnings update.

You could argue that Lyft waited too long to shake up its operations, given the tough comparison to Uber after both company’s Q1 earnings reports. But Lyft is taking a new tack now, which we need to understand.

While Uber and Lyft are among the best-known on-demand companies in the U.S. market, countless startups have tried to use similar models to build businesses of their own in the last half-decade. So, as Uber and Lyft do, so perhaps do the surviving startups that tried to mimic their meteoric rise.

This Friday morning we’re parsing Lyft’s Q1 results and Q2 guidance, the latter of which we’ll place in context of its strategic choices moving forward. Notably there’s quite a lot of what Lyft is doing that nests neatly into other corporate choices that we’ve seen recently. Many other tech and tech-enabled companies are looking to reduce their headcount, remove layers of management and hone their product focus. From that perspective, Lyft is part of a larger trend. Let’s see how those choices fit into its future product and pricing choices.