Here's what Wall Street is saying about Lyft's first report: 'A good first step' to profitability

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Lyft President John Zimmer (R) and CEO Logan Green speak as Lyft lists on the Nasdaq at an IPO event in Los Angeles March 29, 2019.

Mike Blake | Reuters

Despite heavy bottom line losses, Wall Street analysts were largely optimistic on Wednesday about Lyft‘s first quarter earnings report, which was also the ridesharing company’s first as a publicly-traded company.

“Overall, we view the 1Q update as positive as the company progresses towards its long-term goals,” Stifel said.

The first quarter results, as well as Lyft’s 2019 earnings forecast, was “a good first step for the company to provide evidence toward that goal” of profitability, Credit Suisse said.

“Long term, we still see shared transportation as a market with a long runway for secular growth, potentially more rational industry competitive dynamics as maturity approaches & broader positive impacts on society,” UBS said.

JMP Securities urged investors to “take advantage of the recent pullback in shares,” the firm said, as Lyft has fallen more than 24% since its IPO.

Lyft shares were 3.6% lower in premarket trading from Tuesday’s close of $59.34 a share. Its IPO price was $72.

Here’s what every major Wall Street analyst said about Lyft’s results.

UBS’ Eric Sheridan – Buy rating, $82 price target

“With its first earnings call/report, LYFT mgmt (in our opinion) laid out a positive LT vision for the industry, downplayed recent worries on competition and talked up the long term transportation oppty. In addition, we think a Q1 and upside forward commentary should also focus investors back on the potential upside. Long term, we still see shared transportation as a market with a long runway for secular growth, potentially more rational industry competitive dynamics as maturity approaches & broader positive impacts on society.”

Credit Suisse’s Stephen Ju – Outperform rating, $95 price target

“We note that as the potential for margin expansion (and particularly the long-term margin targets) has been a sticking point for LYFT shares among investors, we view the better-than-expected Adj. EBITDA margins reflected in the 1Q19 results, as well as the 2Q19 and 2019 guidance parameters as a good first step for the company to provide evidence toward that goal.”

Jefferies’ Brent Thill – Buy rating, increased price target to $90 from $86

“Lyft delivered a clean ride out of the gate in its first qtr since the IPO, with a convincing beat and raise. Lyft showed: 1) strong momentum in rev & metrics; 2) significant progress in reducing losses; and 3) heading off a L-T concern with a partnership with Waymo. Valuation is attractive at 4.0x CY20 EV/S, and we expect stock to recover as Lyft executes and misconceptions clear.”

J.P. Morgan’s Doug Anmuth –Overweight rating, increased price target to $86 from $82

“Overall, we believe Lyft’s results & outlook were strong, & mgmt addressed a number of key points that we believe will bolster shares: 1) more details & confidence around leveraging insurance over time; 2) 2019 as the peak loss year; 3) core ridesharing losses improving; & 4) competition receding & ridesharing becoming increasing rational. Our 2019 & 2020 revenue estimates are increasing 3-4% & our EBITDA losses also improve notably. We continue to believe there is strong secular growth in TaaS, that Lyft’s singular focus on transportation & emphasis on product innovation will driver further share gains, & that ridesharing will become profitable as the industry becomes more rational over time.”

Piper Jaffray’s Michael Olson – Overweight rating, $78 price target

“The company indicated that, while it continues to spend aggressively on various initiatives, the competitive pressure on rider incentives for core ridesharing has receded to some degree, which is a sign of a rational duopoly between Lyft and Uber for the time being.We believe Lyft will be both a catalyst and beneficiary of the growth of ridesharing and autonomous tech over the next 10+ years. LYFT may not be the right fit for all investors, given the company’s current materially unprofitable state, but for those with a long-term view, and patience, we recommend owning shares at these levels.”

Raymond James’ Justin Patterson – Outperform rating, $85 price target

“We leave the quarter feeling incrementally better about Lyft’s ability to win driver and customer loyalty via product innovation and service, and sustain >50% contribution profit growth into 2020E … the peak loss year is less steep than envisioned. Lyft will still generate EBITDA losses in excess of $1B this year…but that is an improvement from $1.3B previously. The incremental margin improvements demonstrated in 1Q suggest that Lyft can reduce cash burn as it exits 2019.”

Stifel’s Scott Devitt – Buy rating, increased price target to $70 from $68

“The company’s FY:19 revenue guide was set ~3% above our prior expectation at the midpoint. Adj. EBITDA margin for the full year is expected to be -35.4% at the midpoint, approximately 700bps better than our prior expectation. Management noted it is seeing a reduction in rider incentives across the industry and believes overall the current competitive market is rationalizing. Overall, we view the 1Q update as positive as the company progresses towards its long-term goals. We are raising our target price to $70 as a result of higher estimates.”

Canaccord Genuity’s Michael Graham – Buy rating, $75 price target

“Lyft delivered a textbook first public quarter, with modest upside on all key metrics, and solid guidance relative to consensus both for Q2 and 2019. Management sees the competitive landscape in key US cities becoming increasingly rational, which should be a positive signal for investors worried about the potential for near-term pressure from driver incentives and pricing. Lyft is now contribution-margin positive in nearly every market, and the core ridesharing business is showing enough operating leverage to offset even more of the 2019 investment in bikes and scooters. We continue to see Lyft offering the hallmarks of an attractive growth equity investment, including a large addressable market with an attractive duopoly structure, a strong value proposition that should get better with scale, and a business model that holds solid room for upside.”

JMP Securities’ Ronald Josey – Market outperform rating, $78 price target

“While acknowledging the concerns around competition, investments, and greater losses in 2019, given strong top-line growth, contribution margin expansion to ~50% in 1Q19 from 35% in 1Q18, Sales and Marketing leverage, and improving losses, we would take advantage of the recent pullback in shares; since Lyft’s day 1 closing price post its IPO, shares are down 24% compared to +1.8% for the S&P 500. Importantly, with ~30-40% share of the domestic ridesharing market, a market we believe accounts for ~1% of miles driven, we believe Lyft is at scale and that its TAM could ultimately be significantly larger than the $1.2 trillion annual personal transportation market / TAAS market.

KeyBanc’s Andy Hargreaves – Sector weight rating, no price target

“Lyft reported solid 1Q results with better than expected rider and revenue growth. We believe Lyft is performing well and retains a strong top-line growth outlook. However, the ride-sharing market appears to be slowing and the degree of longterm profitability remains uncertain, preventing a more positive outlook on the shares.”

Atlantic Equities’ James Cordwell – Underweight rating, increased price target to $52 from $50

“Q1 revenue and adjusted EBITDA were ahead and, encouragingly, management commented that promotional intensity had eased, aiding profitability. However, Q2 and FY19 revenue guidance imply a steep deceleration, and while not completely unexpected, could bring to the fore concerns regarding how much growth remains in the US ridehailing market under the current operating model … we remain Underweight given the slowing growth profile and our view that Lyft has insufficient scale to ultimately deliver attractive returns.”

Guggenheim’s Jake Fuller – Neutral rating, no price target

“The key debate into the release of LYFT’s first quarterly results as a public company has been whether it could both sustain rapid growth in Active Riders and do so while showing improvement in unit economics. Growth in Active Riders was modestly ahead of consensus and we saw a sequential step-up in revenue/rider and contribution margin. After seeing Uber’s preliminary 1Q results, we worried over the potential for mounting competition to undermine those metrics. While detail in the release and accompanying slide pack was sparse, the lack of obvious competitive pressure is encouraging.”

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