Lyft shares drop 34% on disappointing guidance

Lyft shares plunged 34% Wednesday as investors expect short-term headwinds to weigh on the company.

Lyft reported better-than-expected results on both the top and bottom lines after the bell on Tuesday. But the company provided light guidance for the second quarter and said it would have to keep spending on driver incentives due to surging gas prices, sending shares tumbling. It's unclear how much the company plans to invest or whether it would continue into the second half of the year.

The company will also spend on marketplace tech and brand marketing.

"We believe the softer near-term outlook, need to increase investments, and numerous macro headwinds are likely to weigh on shares in the near-term, causing us to move to the sidelines," Susquehanna analysts said in a note Wednesday that downgraded the stock.

Still, some analysts said in notes following the report that the sell-off was overblown.

"There's no room for error in this environment, but still, this selloff seems overdone," Piper Sandler analysts said in a Tuesday note. "We can understand why the stock is lower following the Q1 call (namely: disappointing EBITDA guidance), and we are cutting our price target to reflect sector-wide multiple compression and lower conviction re: margins. But still, we would buy this post-Q1 weakness," the analysts added.

Canaccord Genuity said in a note Tuesday that, while tempered revenue and outlook is weighing on shares, "the demand picture is clearly improving along with driver availability."

"This marketplace balance will likely drive prices lower, volumes higher, and lead to robust growth for the balance of the year, a dynamic that should help the stock appreciate out of COVID-inflicted value territory," the analysts said.

— CNBC's Michael Bloom contributed to this report.