Lyft (LYFT 1.83%)the second largest ride-sharing provider behind Uber Technologieshas disappointed almost every investor who bought the stock.

As you can see from the chart below, the share price has fallen sharply since its IPO in 2019.

LYFT data from YCharts.

Lyft stock has fallen in three separate phases. First, the stock plunged after a successful IPO as investors believed the loss-making company was overvalued in 2019. The following year, it fell along with the rest of the stock market as the pandemic began, and after a rebound in 2021, the stock slumped again in the bear market as its growth rates slowed.

But there are signs that the stock is finally making a real turnaround. In the second quarter, the company reported a profit under generally accepted accounting principles (GAAP) for the first time, at $5 million, and also reported revenue growth of 41% to $1.4 billion on a 17% increase in gross bookings to $4 billion. This discrepancy is partly due to the growth of Lyft Media, its advertising business, which saw revenue increase over 70% in the quarter. New initiatives to increase the driver pool, speed up arrival times and reduce the impact of peak pricing are paying off.

Now some billionaires seem to be taking notice, as 13-F filings show that some well-known investors bought Lyft shares in the second quarter.

Image source: Getty Images.

The smart money likes Lyft

David Tepper’s Appaloosa Management is one of the most successful hedge funds in the world. The fund currently manages around 14 billion dollars and is Alibaba as the largest participation.

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, arguably a value stock. In fact, Lyft was Tepper’s biggest purchase of the second quarter, as Appaloosa bought 7.5 million shares of the company during the quarter, bringing his stake in the company to nearly 8 million, worth about $100 million today.

Tepper has not commented publicly on his Lyft purchase, but it’s worth noting that he also increased his stake in Uber by buying 140,000 shares of it, giving him 1.5 million shares of the leading ride-sharing company. Tepper owns roughly equal stakes in Lyft and Uber and began buying Uber shares in the second quarter of 2021, anticipating the turnaround at the leading ride-sharing company. Tepper appears to be betting on a similar turnaround at Lyft.

Another billionaire who has his eye on Lyft is Ken Griffin. His hedge fund Citadel Advisors is one of the largest hedge funds in the world with around $400 billion in assets under management.

Griffin is known for its quantitative analysis and data-driven decisions, and the firm 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, increasing its stake to 6.5 million shares, or a share value of about $75 million. Citadel originally bought a stake in Lyft in the first quarter of 2019, so the company is sitting on some losses from that original investment, but now seems like a better time to buy the shares.

Is Lyft a buy?

Lyft expects solid growth for the rest of the year, with rides increasing in the mid-double digits while gross bookings will grow slightly faster.

The company is finally profitable, is entering new areas of business such as advertising, improving its products to satisfy both drivers and passengers, and adding new features. It seems that the business is on the right track.

It’s rare to see two high-profile billionaire investors take over a beaten-down stock like Lyft, but the ride-sharing company has many features that promise a turnaround, including its beaten-down share price. If current momentum continues, the stock will likely pay off.