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The first round of Lyft analyst notes is bullish on the newly public ride-hailing company as brokerages across Wall Street clamor to recommend what one described as “the future of human transportation.”
Though each analyst presented a unique interpretation of Lyft’s business, most emphasized a large, global marketplace, a short list of competitors and a compelling valuation following early stock underperformance.
The flood of brokerage literature follows a quiet period after Lyft’s initial public offering on March 29 when it started trading at $72. Such quiet periods are designed to prevent underwriters and investment banks from using potentially confidential information commenting on a security.
The security has since pulled back and closed Monday at $60.94, down more than 15% from its IPO price. The stock rose more than 2% in premarket trading Tuesday following the barrage of bullish notes.
Credit Suisse analyst Stephen Ju, who initiated coverage with an outperform rating and $95 price target, told clients not to worry about short-term stock moves and focus on the company’s strong fundamentals.
“Lyft offers the consumer for the first time in history the option to rent transportation capacity on an as-needed basis,” Ju wrote. “As Lyft’s stated goal is to offer that Transportation as a Service platform, the addressable market of $1.2 trillion in US transportation spend does seem appropriate over the longer term.”
Piper Jaffray gave a bold title to its note, calling the company a “vehicle for change in the future of human transportation.”
Here’s a wrap of all the major analyst opinions.
“Our bull thesis is driven by: 1) Secular growth toward Transportation-as-a- Service that supports Lyft’s projected 32% revenue CAGR through 2021. We believe ridesharing’s penetration of both miles traveled and addressable transportation spending is in the low-mid single-digits and Lyft has dual growth levers in Active Riders and Revenue per Active Rider; 2) Lyft’s founders’ singular focus on consumer transportation, undistracted by other industries and adjacencies; 3) Lyft’s history of innovation across Shared Rides, Express Pay, commercial AV, and other offerings; 4) Our view that ridesharing will be profitable as the industry scales and becomes more rational over time.”
“Similar to what is already happening for enterprises and cloud adoption, Lyft offers the consumer for the first time in history the option to rent transportation capacity on an as-needed basis versus incurring the upfront costs of vehicle ownership and ongoing costs of maintenance, insurance, and gas. And as Lyft’s stated goal (and similarly for all ride sharing platforms) is to offer that Transportation as a Service platform, the addressable market of $1.2 trillion in US transportation spend (per the US Department of Commerce and the Bureau of Economic Analysis) does seem appropriate over the longer term in our view.”
“Vehicle for change in the future of human transportation … We believe Lyft will be both a driver 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. We do expect solid near-term top line results, as the company has been gaining market share in recent quarters, but the path to significantly positive net income will be a multi-year journey.”
“Our Outperform rating is based on LYFT’s differentiated position as singularly focused on Transportation as a Service (TaaS), including expansion into bikes and scooters and AV, as well as developing initiatives designed to court driver loyalty, such as Express Drive (rental), Driver Hubs, and bourgeoning financial services that support instant payment, among other benefits. Ridesharing is poised to benefit from a broad shift towards TaaS, with a massive addressable market.”
“Lyft holds a unique and valuable strategic position in North American ride-sharing. However, we believe the large cost gap between owned cars and ride-sharing suggests that a significant portion of its profit potential will be unlocked only after the driver is removed, which likely remains several years away. In the meantime, we expect steady deceleration in market growth and Lyft’s pace of share gain, which seems likely to prevent revenue and adjusted EBITDA from meaningfully exceeding our expectations.”
“Initiating coverage with a Buy rating and $86 PT. Lyft has become a strong #2 in the U.S. ridehailing market as rev grew 103%, take rate +370 bp, and EBITDA mgn +2200 bp in ’18. However, stock is down ~15% since the IPO on negative sentiment due to concerns over ongoing losses and competition from Uber. This has driven valuation to the bottom 1/5 of its peer group, despite growth in top 1/5. We expect stock to recover as Lyft executes and misconceptions clear.”
“We see LYFT as one of two players (w/ duopoly potential) attempting to utilize the shared economy model as a means to disrupt the North American transportation market. LYFT has all the positive facets of a multi-sided marketplace as they capitalize on scaling riders (across an increasing array of transportation modes), scaling drivers (thru incentives & brand affinity) & thinking about LT optionality of their network effects on subscription models, service elements & autonomous driving. Long-term we see a market with a long runway for secular growth, potentially more rational industry competitive dynamics as maturity approaches & broader positive impacts on society.”
“Lyft is in a new and evolving industry, and we view the company as: 1) solving real consumer frictions in personal transportation with a technology-centric model; 2) having a long-term strategic focus led by company founders; 3) addressing large potential profit pools in the personal transportation industry; and 4) a unique strategic asset with long-term optionality from investments in non-core areas, such as autonomous vehicle technology and other forms of personal transportation. These themes lead us to recommend shares of Lyft at the current valuation.”
“We think Lyft has the hallmarks of an attractive long-term growth investment, including a large market opportunity with an attractive duopoly industry structure, a strong value proposition that should get better with scale, and a business model that holds solid room for upside.”
“We believe Lyft is at scale in terms of riders and drivers, in a market that has relatively large barriers to entry and is increasingly becoming a duopoly. Based on our analysis, we believe Lyft can continue to grow faster than the market, while acting more rationally with marketing, promotions, and incentives—80% of new users are now acquired organically—with upside from several new products and services, such as bikes and scooters, and longer term, with autonomous vehicles.”
