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On Wednesday, BMO Capital Markets reiterated a Market Perform rating for Lyft shares (NASDAQ:LYFT), maintaining a price target of $15.00. The stock currently trades at $11.03, with analyst targets ranging from $10 to $26. According to InvestingPro analysis, Lyft is currently undervalued, with 12 additional exclusive insights available to subscribers. The assessment by BMO Capital’s analyst Brian J. Pitz highlighted the online taxi and rideshare platform FREENOW’s role in Lyft’s strategy. FREENOW, which Lyft is in the process of acquiring, has a significant presence in the taxi mobility sector, with online taxis accounting for a large portion of its rides and gross bookings.
Lyft’s ongoing innovation efforts for both riders and drivers, such as the ’Wait & Save’ and ’Prime-Time’ features, along with tools for drivers to estimate arrival times, are expected to bolster the Rideshare segment. Additionally, FREENOW’s micromobility offerings, primarily escooters, are seen as a value-add for customers.
The acquisition of FREENOW is set to expand Lyft’s total addressable market (TAM) from 161 billion trips to over 300 billion. FREENOW itself has 6.3 million riders compared to Lyft’s approximately 25 million by the end of 2024. This expansion comes as Lyft demonstrates strong momentum, with revenue growing 31.39% over the last twelve months to $5.79 billion. InvestingPro subscribers can access detailed financial health scores and comprehensive analysis in the Pro Research Report, which provides actionable insights for over 1,400 US stocks. Despite only representing 2% of the €41 billion market that includes Taxi and Rideshare Bookings, FREENOW’s European footprint presents incremental growth opportunities for Lyft.
Lyft’s three-year gross bookings guidance of 15%, introduced in June 2024, is a focal point for BMO’s evaluation, with the firm noting that they remain below these levels due to factors such as execution and insurance cost inflation. The first quarter bookings for 2025 are expected to grow by 10-14%, which is below the investor day ambitions, reflecting the competitive pressure from Uber (NYSE:UBER) and other established players in Europe like Bolt, BlaBlaCar, Cabify, and Gett.
Lyft announced the purchase of FREENOW for $197 million in an all-cash deal, which is valued at approximately 0.2 times the gross booking value of nearly $1 billion. FREENOW’s contribution to Lyft’s adjusted EBITDA is anticipated to be slightly positive. At the end of 2024, Lyft reported having around $2 billion in cash and short-term investments.
Despite the opportunities presented by the FREENOW acquisition, risks remain for Lyft. These include the challenge of meeting the three-year booking growth ambitions, the pressure of insurance cost inflation outpacing unit volume growth, and the intense competition with Uber in the US and Europe. The transaction is expected to be finalized in the second half of 2025. Investors should note that Lyft maintains a current ratio of 0.76, confirming the company’s short-term obligations exceed liquid assets. For a complete assessment of Lyft’s financial health and growth potential, including exclusive Fair Value calculations and peer comparisons, visit InvestingPro.
In other recent news, Lyft announced its acquisition of the European mobility app FREENOW from BMW (ETR:BMWG) and Mercedes-Benz (OTC:MBGAF) for approximately $197 million. This strategic move is expected to nearly double Lyft’s total addressable market and increase annualized gross bookings by approximately €1 billion. The acquisition represents a significant expansion into the European market, with plans to operate in 11 countries, enhancing Lyft’s global presence. BTIG has maintained a Neutral rating on Lyft following this announcement, noting that the acquisition could add around $80 million to annualized revenue. Meanwhile, Oppenheimer initiated coverage with an Outperform rating, citing Lyft’s strategic cost rationalization and investment in technology as key factors for growth. The firm also set a price target of $15, based on a projection of 10 times Lyft’s estimated 2026 EBITDA. These developments are part of Lyft’s broader strategy to increase market share and profitability in the competitive ride-sharing industry. The acquisition of FREENOW is expected to provide Lyft with a significant boost in its quest to become a dominant player in the global ride-hailing market.
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