BofA cuts Lyft stock price target to $19, maintains Buy rating

On Wednesday, BofA Securities adjusted its outlook on Lyft shares (NASDAQ:LYFT), reducing the price target to $19 from the previous $21 while retaining a Buy rating on the stock. Currently trading at $13.96, Lyft’s stock sits below both the adjusted target and its 52-week high of $20.82. According to InvestingPro analysis, the stock appears undervalued based on its Fair Value metrics. The revision follows an announcement by Waymo regarding the progression of its autonomous vehicle program.

Waymo, a significant player in the self-driving vehicle industry, has recently expanded its freeway testing. The company stated, "We’re beginning to provide our employees with access to fully autonomous rides on LA freeways—a key step toward expanding this capability to all riders." This development comes after Waymo was granted permission by the California Public Utilities Commission (CPUC) to initiate freeway trips in San Francisco and Los Angeles in March 2024, with testing in San Francisco starting in August of the same year.

Despite the advancements in Waymo’s technology, BofA Securities suggests that the impact on Lyft might not be as immediate as some expect. The firm’s analysis indicates that the market may be overestimating the speed at which Waymo will be able to offer its autonomous freeway rides to the general public. With impressive revenue growth of 25.4% in the last twelve months and a market capitalization of $5.79 billion, Lyft continues to show strong operational momentum. InvestingPro subscribers can access 8 additional key insights about Lyft’s financial health and growth prospects. After nearly a year since receiving the CPUC’s approval, Waymo continues its testing phase in San Francisco. For instance, a journey from the San Francisco Zoo to Oracle (NYSE:ORCL) Park avoids the freeway and takes approximately 50 minutes with Waymo, compared to just 30 minutes if the ride is booked through Lyft.

The analyst from BofA Securities, Michael McGovern, points to these observations as a basis for the ongoing support of Lyft’s stock with a Buy rating, despite the lowered price target. The firm acknowledges that the eventual public launch of Waymo’s freeway rides could pose a challenge for Lyft, but it appears that there may still be considerable time before this becomes a reality.

As the situation develops, investors and industry watchers will be closely monitoring both Waymo’s testing progress and Lyft’s performance in the face of potential future competition from autonomous vehicle services. With Lyft’s next earnings report due on February 11, 2025, and analyst price targets ranging from $14 to $26, the company’s near-term trajectory remains a focal point. For comprehensive analysis and detailed insights, investors can access Lyft’s full financial health assessment and Fair Value analysis through InvestingPro’s detailed research report, part of its coverage of over 1,400 US stocks.

In other recent news, ride-hailing company Lyft has been in the spotlight due to a series of developments. Delta Air Lines (NYSE:DAL) announced its decision to end its partnership with Lyft, switching to Uber (NYSE:UBER) for its SkyMiles loyalty program, a move that could impact Lyft’s future growth strategy and earnings estimates. Meanwhile, Lyft’s stock was upgraded from Hold to Buy by Benchmark analysts, who highlighted the company’s strategic moves and growth potential despite the competitive market.

BofA Securities also reiterated its Buy rating on the company, maintaining a price target of $21.00, reflecting confidence in Lyft’s market position and future prospects. The company’s recent performance in the San Francisco market was also highlighted, showing resilience against competition from autonomous vehicle companies like Waymo.

General Motors Co (NYSE:GM)’s decision to halt funding for Cruise’s robotaxi development has caused a decline in shares of ride-hailing companies, including Lyft. This development, as GM reassesses its involvement in the autonomous vehicle sector, could have implications for Lyft.

BTIG, a financial services firm, maintained its Neutral rating on Lyft, which has shown impressive revenue growth of 25.4% over the last twelve months. However, the firm also noted that Lyft faces increased costs, particularly in terms of insurance. Despite these challenges, recent upgrades following Lyft’s Q3 2024 results, which showed a 32% year-over-year revenue increase, reaching a record $1.52 billion, indicate a positive adjustment in the company’s stock outlook.

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