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'Taking a different approach': Lyft reports quarterly earnings Tuesday after market close. Here's what 5 analysts are saying.
'Taking a different approach': Lyft reports quarterly earnings Tuesday after market close. Here's what 5 analysts are saying.
Carmen ReinickeFeb 11, 2020, 18:47 IST
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DON EMMERT/AFP/Getty ImagesThe Lyft logo is shown on the screen at the Nasdaq offices in Times Square on March 29, 2019 in New York.
Lyft is scheduled to report its fiscal fourth-quarter and full-year 2019 earnings on Tuesday after market close.
Investors are waiting to see if Lyft will try to match Uber's updated timeline to profitability, which the competitor ride-hailing company announced last week.
Here's what five Wall Street analysts are saying about Lyft before its earnings report.
Lyft is gearing up for its latest quarterly release.
Shares of the ride-hailing company gained as much as 8% Monday as investors picked up the company stock ahead of its fiscal fourth-quarter and full-year 2019 earnings release, due Tuesday after market close.
Uber's updated profitability target means it may reach the important milestone ahead of Lyft, although previously the companies had similar timelines. In October 2019, Lyft announced that it expected the company to turn a profit on an Ebitda-adjusted basis by the fourth quarter of 2021, instead of in 2022, which Wall Street analysts had previously forecast. Shortly after, Uber said it would turn a profit at around the same time.
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Uber's move to push up its own profitability timeline shows that "the race is on," wrote Jake Fuller of Guggenheim Securities in a Monday note. "But we are not sure that Lyft wants or needs to win," he added.
Lyft is running at half the incremental margin of Uber's rides business, which suggests that it's taking advantage of Uber's accelerated timeline to grow its market share of that business, Fuller wrote. While that means it may work toward profitability on a longer timeline, it's a trade-off that Fuller sees as "acceptable for a #2 player."
Lyft has struggled to make meaningful gains since its March initial public offering. At Monday's close, it traded 25% lower than its IPO price of $72. Investors have been hesitant of the company because of its unprofitability and steep losses posted in the first few months after its public offering.
Still, Wall Street analysts are largely bullish on the company. The company has a consensus price target of $66.62, roughly 24% higher than where shares closed on Monday. Lyft also has 29 "buy" ratings, nine "hold" ratings, and one "sell" rating, according to Bloomberg data.
Here's what five Wall Street analysts had to say about Lyft ahead of its Tuesday earnings release, in order of lowest to highest price target:
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Axel Springer, Insider Inc.'s parent company, is an investor in Uber.
1. Monness Crespi Hardt: "Basking in the Uber glow"
Price target: None
Rating: Neutral
Lyft is "basking in the Uber glow," wrote Brian White of Monness Crespi Hardt in a note Monday, following Uber's rosy earnings that also lifted Lyft's shares. Still, Uber's report last week raised the bar for Lyft, he said.
"Although Lyft's stock has proven a disappointment since its IPO, the company has executed well on its quarterly results as a public company and we believe Lyft's focused strategy is not a competitive advantage," he said.
2. Deutsche Bank: "Reflecting less confidence"
Price target: $58 (from $70)
Rating: Buy
Deutsche Bank lowered its target price for Lyft "reflecting less confidence in the outlook over the medium term given a changing competitive posture in terms of its pricing," wrote analyst Lloyd Walmsley in a Thursday note.
He maintained his buy rating on the stock, but said that the bank continues "to see Uber as a better long-term story" given its market share, food delivery business, global addressable market, and minority investments abroad.
"We think there is room for two players and the market and both can see more rapid moves toward profitability," he wrote.
3. Guggenheim: "Lyft is taking a different approach"
Price target: $60
Rating: Buy
It's feasible that Lyft could match Uber's fourth-quarter 2020 target, as it has a "substantially smaller Ebitda loss," wrote Jake Fuller of Guggenheim Securities in a Monday note.
He continued: "That said, a comparison of incremental margin, along with commentary from both Lyft and Uber on recent promotional activity, might suggest that Lyft is taking a different approach."
In short, Fuller wrote that Lyft does not have to match Uber's fourth-quarter 2020 objective "in order for the stock to work."
It's acceptable for Lyft "to tilt strategically more towards growth and market share, as long as it is still on track and progressing towards Ebitda positive at some point in 2021," he wrote.
4. Wedbush: "Still plenty of opportunities"
Price target: $75
Rating: Outperform
"We continue to believe the key to Lyft's future earnings power, path to profitability, and future of ride share as a percentage of miles driven is growth in each year's cohort's usage over time," wrote Daniel Ives of Wedbush in an earnings preview note at the end of January.
He continued: "To this point, we think there is still plenty of opportunities to do so as it is taking the right steps by focusing on multimodal methods of transportation, one car ride and one bike/scooter ride counts as two rides and ultimately also gaining more market share during peak ride periods domestically."
5. RBC Capital Markets: "Great chance of upside vs. downside"
Price target: $82
Rating: Outperform
RBC Capital Markets sees Wall Street estimates for Lyft to be "reasonable, with a greater chance of upside vs. downside variance, in part due to what we perceive to be improved industry conditions," wrote Mark Mahaney in a Friday note.
He believes that Lyft will benefit "from a pure play on US Ridesharing," and that the company is focused on disciplined investments and products that will continue to drive adoption.
