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Investing in Lyft Isn't for Everyone, Analysts Say

Investing in Lyft Isn't for Everyone, Analysts Say
(Roman Tiraspolsky/Dreamstime)

Thursday, 08 August 2019 08:25 AM

Lyft Inc.’s second-quarter “beat and raise” results won praise from Wall Street, though investing in the San Francisco-based ride-sharing stock isn’t for everyone, analysts said.

Lyft shares are trading 6.2% higher in the pre-market, while rival Uber Technologies Inc. is up 4.7%. Lyft indicated that the price war with its competitor -- which reports after the close Thursday -- is easing. Both stocks are still below the price at which they went public this year.

“LYFT may not be the right fit for all investors, given the company’s current materially unprofitable state,” Piper Jaffray analyst Michael J. Olson wrote in a note. “But for those with a long-term view, and patience, we recommend owning shares at these levels.”

Here’s what analysts are saying about Lyft’s earnings:

JPMorgan, Doug Anmuth

(Overweight, raises PT to $90 from $86)

  • Very strong results with really good top-line growth and a “clearer path to profitability.”
  • Results indicate that 2018, not 2019, will be the peak year for earnings losses at the company.

RBC, Mark Mahaney

(Outperform, raises PT to $76 from $72)

  • A “clean beat and raise,” both on second-quarter results and guidance for the remainder of 2019. Overall, the fundamental trends for the business are generally positive.
  • Importantly, company is “starting to prove out” its path to profitability, the most significant factor for investor pushback when the firm listed.

Jefferies, Brent Thill

(Buy, PT $90)

  • Strong momentum in revenue despite fears of disruption from Uber, with better-than-expected progress on reducing losses.
  • Valuation is attractive and Jefferies expects Lyft will “continue to win over skeptics” as it executes on its strategy and as its model is better understood by the market.

Loop Capital, Jeffrey Kauffman and Rob Sanderson

(Hold, PT $60)

  • Not surprised by the top-line strength of the business but overall the results were “better than we thought and we did not anticipate the impressive display of marketing leverage.”
  • Still, results are unlikely to shift investor opinion as the division among analysts is not about demand but more about unit economics, the path to profitability and the long-term competitive dynamics.
  • Leverage and pricing power both clear positives but profitability is “still far away” and how the long-term competitive landscape will shake out is still unknown.

KeyBanc Capital Markets, Andy Hargreaves

(Sector Weight)

  • Excellent results with good pricing power and better-than-expected operating leverage driving an increase to KeyBanc’s revenue, gross profit and Ebitda estimates.
  • Maintains the view that the overall ride-sharing market in the U.S. is slowing and the current longer-term margin expectations are “aggressive.”

Loup Ventures, Gene Munster

  • Most encouraging data point is that sales and marketing expenses declined as a percentage of revenue, signaling a “more rational competitive environment with Uber” and also highlighting the path to profit.
  • Overall a solid quarter, with the company growing revenue per ride and seemingly its market share in the ride-sharing industry.
  • “That said, Lyft investors need to have an appetite for volatility and a commitment to the company seeing its long-term bets in autonomy pay off.”

Bloomberg Intelligence

  • Price increases and a focus on more profitable areas, like airport and corporate rides, should help to boost revenue per rider growth for Lyft.
  • But rider gains are likely to slow due to the company’s “niche focus” on the U.S. and Canadian markets, a strategy which will weigh on top-line momentum beyond 2019.

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Lyft Inc.'s second-quarter "beat and raise" results won praise from Wall Street, though investing in the San Francisco-based ride-sharing stock isn't for everyone, analysts said.Lyft shares are trading 6.2% higher in the pre-market, while rival Uber Technologies Inc. is up...
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Thursday, 08 August 2019 08:25 AM
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