Here's why Lyft shares rallied 35% in one day despite CEO's big blunder

Mobility services company Lyft's shares surged 35% in just one day, to $16.09, their best since the company’s initial public offering (IPO) in 2019. The surge followed a clerical error by Lyft CEO David Risher that unintentionally inflated the company's earnings outlook in a press release, according to a CNBC report.

Lyft's stock initially soared over 60% before a correction tempered the gains.

CEO David Risher took responsibility for the mistake, acknowledging that an extra zero was inadvertently added to the earnings margin expansion figure.

During an interview with Bloomberg Television, Risher expressed regret, stating, "First of all, it's on me. This was a bad error, but it was one zero in a press release."

The error projected a margin expansion of 500 basis points (5%) in 2024, whereas the accurate figure is a more modest 50 basis points (0.5%).

The correction impacted Lyft's market cap by over $2 billion, but the shares maintained a 35% increase.

Despite the correction, Lyft's financial results exceeded analysts' expectations, with $1.22 billion in revenue for the quarter, a 4% increase from the previous year, and adjusted earnings of 18 cents per share, surpassing the expected 8 cents, according to LSEG, formerly known as Refinitiv.

Analysts at MoffettNathanson, in a note titled "Lyft: We all make mistakes," acknowledged their previous downgrade on the stock and raised their rating to neutral from sell, according to a CNBC report.

They cited better-than-expected take rates and improved cost discipline as contributing factors to Lyft's positive performance. Despite the CEO's admitted error, the company is still being perceived as having had a "great quarter."