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On Thursday, BofA Securities adjusted its stance on Lyft (NASDAQ:LYFT), downgrading the company’s stock rating from Buy to Underperform and reducing the price target significantly to $10.50 from the previous $17.50. The current analyst consensus shows mixed sentiment, with targets ranging from $10 to $26. According to InvestingPro data, the stock appears undervalued based on its Fair Value analysis. The downgrade comes amidst growing concerns over the competitive pressure from autonomous vehicle (AV) technologies, particularly the rapid expansion of Waymo in San Francisco and Los Angeles.
The BofA Securities analyst expressed a lack of confidence in Lyft’s near-term upside due to the absence of scalable AV partnerships that are ready to launch in the near future. Despite acknowledging Lyft’s solid user base, which has grown 10% year-over-year to 20 million users, and a consistent ride frequency, the analyst pointed to recent pricing headwinds that are expected to persist and negatively affect the company’s profit margins.
According to data from Bloomberg Second Measure, Lyft’s Average Transaction (JO:NTUJ) Value has continued to decline year-over-year as of March. Despite these pricing pressures, Lyft has achieved significant revenue growth of 31.39% over the last twelve months, reaching $5.79 billion. This trend raises concerns about the company’s ability to maintain profitability in the face of intense competition from AV advancements. For deeper insights into Lyft’s financial health and growth prospects, InvestingPro subscribers have access to over 30 additional key metrics and analysis.
The analyst did note the long-term potential for Lyft within the AV ecosystem. However, due to the company’s partnerships in the AV space still being in their early stages, the near-term outlook appears less promising. The report suggests that Lyft’s current market position may be challenged by competitors who are advancing more rapidly in the integration and deployment of autonomous vehicle technologies.
Lyft’s stock performance will continue to be monitored closely by investors as the transportation industry evolves with the increasing presence of autonomous vehicles. While the reduced price target reflects near-term concerns, seven analysts have recently revised their earnings estimates upward, and the company is expected to remain profitable this year. The reduced price target reflects the analyst’s revised expectations for the company’s financial prospects in the short term. Get comprehensive analysis and detailed valuation metrics with InvestingPro’s exclusive Research Report, part of their coverage of over 1,400 US stocks.
In other recent news, Lyft is reportedly in talks to acquire FreeNow, a taxi application owned by BMW (ETR:BMWG) and Mercedes, according to Manager Magazin. The negotiations are said to be nearing completion, although neither party has officially confirmed the deal. Meanwhile, activist investor Engine Capital has acquired a $50 million stake in Lyft, which is approximately 1% of the company. This move has prompted discussions about potential strategic changes, including a review of Lyft’s board and corporate governance. KeyBanc Capital Markets maintained its Sector Weight rating on Lyft, indicating a neutral stance amid these developments. BofA Securities, however, reiterated a Buy rating with a $17.50 price target, suggesting a more optimistic outlook. The involvement of Engine Capital is seen as a potential catalyst for change, as the investor pushes for a strategic review and board appointments. As these situations develop, investors will be monitoring the impact of these changes on Lyft’s strategic direction.
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