This growth stock is down 83%, but billionaire investors are getting it. Is it a purchase?

Lyft (LYFT 1.83%)the 2nd ride-sharing operator from the back Uber technologiesburned almost every investor who bought the stock.

As you can see from the chart below, the stock has fallen sharply since its initial public offering (IPO) in 2019.

LYFT data by YCharts.

Lyft stock fell in three separate episodes. First, the stock crashed after a successful IPO because investors believed the money-losing company was overvalued in 2019. The following year, it fell with the rest of the stock market when the pandemic began, and after a recovery in 2021, the action decreased. faded back into the bear market as its growth rates slowed.

However, there are signs that the stock is finally making a real turnaround. In the second quarter, the company reported its first generally accepted accounting principles (GAAP) profit of $5 million and also reported a 41% increase in revenue to $1.4 billion, with a 17% increase in gross bookings to $4 billion. That discrepancy is driven in part by growth in Lyft Media, its advertising business that generated more than 70% revenue growth in the quarter. New initiatives to increase their number of drivers, speed up arrival times and reduce the impact of peak hour pricing, or surge pricing, are paying off.

Now, a number of billionaire investors seem to be taking note that 13-F filings revealed that some well-known investors bought Lyft stock in the second quarter.

Image source: Getty Images.

Smart money likes Lyft

David Tepper’s Appaloosa Management is one of the most successful hedge funds in the world. The fund currently manages about $14 billion and counting Alibaba as his biggest exploit.

Tepper is known for investing in distressed debt and high-value stocks, which seems to explain his current interest in Chinese stocks like Alibaba, as well as Lyft, which is arguably a value stock. In fact, Lyft was Tepper’s biggest acquisition in the second quarter, as Appaloosa bought 7.5 million shares of the stock in the quarter, bringing his stake in the company to nearly 8 million, worth about $100 million. of dollars today.

Tepper hasn’t commented publicly on the Lyft acquisition, but it’s worth noting that he added to his stake in Uber, buying 140,000 shares of it to bring his holdings in the ride-sharing leader to 1.5 million shares . Tepper has roughly equal stakes in Lyft and Uber and began buying Uber shares in the second quarter of 2021, anticipating the ride-hailing leader’s turnaround. Tepper seems to be betting on a similar shift in Lyft.

Another billionaire who has taken a shine to Lyft is Ken Griffin, whose hedge fund Citadel Advisors is one of the largest hedge funds in the world, with roughly $400 billion in assets under management.

Griffin is known for using quantitative analysis and data-driven decision making, and the company has thousands of positions in its fund. Lyft is a high-risk stock, but Citadel’s track record is impeccable as it is considered the most profitable hedge fund of all time.

Citadel bought 4.4 million shares of Lyft in the second quarter, bringing its stake to 6.5 million shares, or about $75 million worth of stock. Citadel initially took a stake in Lyft in the first quarter of 2019, so the company has some losses from that initial investment, but now seems like a better time to buy the stock.

Is Lyft a buy?

Lyft expects solid growth for the rest of the year, calling for ride growth in the mid-teens and gross bookings to grow slightly faster.

With the company finally turning to profitability, tapping into new businesses like advertising, improving its product in a way that pleases drivers and riders alike, and adding new features, the business looks set to head into the right direction.

It’s rare to see two high-profile billionaire investors go after a downbeat stock like Lyft, but the ride-sharing company has many of the hallmarks of a turnaround opportunity, including a battered stock price. If its current momentum continues, the stock looks likely to pay off.