Lyft's set to surge 33% on a ridership bounce-back and stronger path to profitability, Wedbush says
- Lyft's third-quarter figures weren't thrilling, but its earnings guidance and vaccine hopes stand to push the stock to pre-pandemic highs, Wedbush said Wednesday.
- Analyst Dan Ives lifted his price target for Lyft shares to $48 from $37 in a note to clients, a 33% upside from Tuesday's close.
- Lyft executives said Tuesday they expect the company to be profitable by the fourth quarter of 2021.
- The optimistic guidance, when coupled with new hopes for a coronavirus vaccine, should fuel a rebound in rides and a strong stock rally, Ives said.
- Watch Lyft trade live here.
With a key labor victory in California behind it, Lyft is back on track to reach profitability and trade at pre-pandemic levels before the end of 2021, Wedbush analyst Dan Ives said Wednesday.
The number-two ride-hailing firm reported third-quarter earnings on Tuesday that landed slightly above analyst expectations. Lyft lost $1.46 per share share and posted revenue sof $499.7 million for the three months ended September 30.
Yet the company's forward guidance was likely the most positive aspect of the report for Lyft investors. Executives said they expect to be profitable on an EBITDA basis by the fourth quarter of 2021, even with slightly fewer rides than previously expected.
Because of that, Lyft is coming out of the pandemic "in a structurally better position" after slashing $300 million in costs and boosting efficiencies, Ives said. "The company is rebounding quicker than the Street had anticipated given the dark lows in March and April."
Wedbush raised its price target for Lyft shares to $48 from $37, implying a 33% rally from their Tuesday close. The positive note helped lift stock as much as 7.9% in Wednesday trading. Wedbush maintains an "outperform" rating on the shares.
Other analysts held less rosy views of Lyft's quarterly earnings. RBC Capital Markets lowered its price target to $46 from $48, citing "weak" fundamentals and recovery trends that are "getting less worse." While JPMorgan issued a price-target increase similar to Wedbush's, it noted that fourth-quarter guidance was "lighter than expected."
The passage of Proposition 22 in California marked a turning point for the company, Ives said. The legislation allows Lyft to continue to classify its drivers as contractors and avoid the jump in costs that would come with deeming them full-time employees.
That "nightmare" of legislative risk is now "in the rearview mirror," and all eyes are now focused on the firm's rebound, the analyst said.
Newly bolstered vaccine hopes can even drive Lyft to profitability ahead of schedule, according to Ives. Rides were down 47% year-over-year in October, and rising COVID-19 cases endanger further improvement. Pfizer's Monday vaccine update can lead "to a potentially quicker rebound in rides" should it effectively counteract the virus's spread Ives said.
Lyft traded at $36.91 per share as of 12 p.m. ET Wednesday, down 15% year-to-date. The company has 31 "buy" ratings and nine "hold" ratings from analysts, with a median price target of $45.83.
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