Why Lyft stock rose 28% in November

stock lift (lift -0.83%)America’s second-largest ride-hailing company started making moves last month. Transportation stocks benefited from the Federal Reserve’s decision to keep interest rates steady, and the company also reported solid third-quarter results that showed it was making progress toward profitability. Stock prices surged again at the end of the month, but the reason was unclear.

The stock rose 28% in the month, according to data from S&P Global Market Intelligence. The gains were primarily seen in two separate rallies. One was at the beginning of the month and the other was at the end.

LYFT data from YCharts.

Lyft begins heading north

Since its 2019 IPO, Lyft has been mostly a disaster for investors. The stock price has fallen more than 80% from the IPO price of $72.

However, the upward trend continued last month due to macroeconomic news. First, Lyft rose 8.4% on November 2 after the Federal Reserve kept interest rates steady following its latest meeting. This is a particularly bullish signal for interest rate sensitive stocks like Lyft. And it rose 7.2% the next day, as the weak jobs report was interpreted as a good sign for lackluster growth stocks like Lyft.

After Lyft released its third quarter report the following week, the stock actually fell 6%. The company’s revenue rose 10% to $1.15 billion, in line with expectations. However, the market appears to be disappointed with the company’s 15% gross booking growth rate, which is lower than its competitors. UberThe growth rate is 21%. Lyft’s guidance was also below expectations. Still, the company came close to reporting a generally accepted accounting principles (GAAP) profit for the first time, posting a net loss of $12.1 million, or $0.03 per share.

At the end of the month, stocks surged again on no fundamental news, but crossed several moving averages, which some investors see as a bullish signal.

What’s next for Lyft?

Lyft stock continued to rise in early December on further signs that the Federal Reserve was done raising the federal funds rate for this cycle. Lyft is a cyclical business and has nearly $1 billion in debt on its balance sheet, making it sensitive to interest rates and economic conditions. Additionally, their low stock prices and low GAAP profitability make them more sensitive to interest rates, as growth stock valuations tend to increase as interest rates fall.

Lyft stock could continue to rise as profitability improves significantly from a year ago. Pay attention to interest rates too, as a dovish Fed should provide more support to stocks.