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- Lyft received another lukewarm report from a Wall Street analyst.
- Susquehanna’s Shyam Patil initiated coverage on the ride-hailing app with a "neutral" rating due largely to Uber’s threat as a larger competitor.
- Watch Lyft trade live.
Lyft‘s life as the first public ride-hailing company has been dotted with legal drama, a plunging stock, and largely cautious assessments from Wall Street analysts — the latest of which dropped on Wednesday.
"While our analysis of unit economics suggests profitability is possible (which we model to occur within seven years), the extremely competitive nature of the space and going up against an aggressive #1 player in Uber makes it tough to predict future customer acquisition costs as well as rider and driver retention," Susquehanna analyst Shyam Patil wrote while initiating coverage on Lyft with a "neutral" rating and $57 price target — mostly in line with his peers.
One of his chief concerns is competition from rival Uber, which is expected to go public in the coming weeks. He also harped on Lyft’s uncertain path to achieving a profit — a multi-million-dollar issue both ride-hailing companies face.
Susquehanna’s initiation of coverage comes a little over three weeks after Lyft made its historic debut, which was met with much fanfare and massive investor demand. But the stock has fallen 20% from the $72 where shares initially priced, and 33% from its opening print of $87.24.
"LYFT clearly has built one of the leading ridesharing services in the US and operates in a very large and growing market," Patil wrote in his report. "However, we’re worried about the competitive dynamics of being the #2 player in a market where scale is extremely important, and switching costs for riders and drivers are relatively low and barriers to entry — while they exist — aren’t insurmountable, especially for larger scaled US and international Internet companies."
Patil, who also covers other internet stocks like Alphabet, Snap, Twitter, and Zillow, said another concern is Lyft’s insurance costs. He called them a "large and a black box where forward visibility is very limited."
Those costs were about $1 a ride last year, representing an 18% year-over-year increase, and comprised 30% of revenue in 2017 and 27% in 2018, he noted.
Patil’s $57 price target, which is based on an enterprise-book value of around five times 2020 revenue (one way of valuing what a share of Lyft is worth), is just pennies below where the stock was trading on Wednesday.
Uber, for its part, filed to go public with the Securities and Exchange Commission last week at an expected valuation of between $90 billion and $100 billion – below the $120 billion previously expected. Lyft debuted at a valuation of about $24 billion.
Wall Street is generally cautious on Lyft. Of analysts surveyed by Bloomberg, seven have "hold" ratings, four say "buy," and one recommends "sell."
Lyft gained as much as 4.2% on Wednesday, to a high of $58.68 a share.
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