Loop Capital cuts Lyft stock price target to $20, maintains Buy

On Tuesday, Loop Capital Markets adjusted its financial outlook for Lyft (NASDAQ:LYFT), currently trading at $12.03 with a market capitalization of $5 billion, lowering the price target on the shares to $20.00 from the previous target of $23.00. Despite the reduction, the firm maintained its Buy rating on the ride-hailing company’s stock. According to InvestingPro data, 7 analysts have recently revised their earnings estimates upward for the upcoming period.

Loop Capital’s decision to revise the price target downward comes as a consequence of increased EBITDA estimates coupled with a reduced valuation multiple. The analyst noted that Lyft’s valuation multiple is now 12 times adjusted EBITDA, a decrease from the former 15 times. The company has demonstrated strong performance with impressive revenue growth of 31.4% over the last twelve months, though InvestingPro analysis indicates it’s currently trading at a high EBITDA valuation multiple. The analyst’s commentary highlighted that since the post-COVID reevaluation of the company’s value, Lyft’s stock has exhibited a pattern of higher lows within a broad trading range but has struggled to surpass prices in the high teens.

Lyft’s stock recently experienced a decline following the company’s release of a less-than-optimistic forecast for growth in gross bookings. However, Loop Capital believes that Lyft’s EBITDA growth, which is currently valued at less than 10 times, significantly below the average of its peers, has the potential to propel the stock upwards. This optimistic outlook persists even if Lyft fails to meet its target of a 15% compound annual growth rate (CAGR) in bookings through 2027.

The analyst emphasized the contrast between Lyft’s valuation and that of its competitors, pointing out that Lyft’s valuation is half of the peer average. This discrepancy may offer a potential upside for the company’s shares, as the market could eventually recognize the value of Lyft’s EBITDA growth.

In summary, Loop Capital has revised its price target for Lyft to reflect updated EBITDA projections and a lower valuation multiple. Despite the reduced price target, the firm’s Buy rating remains unchanged, signaling confidence in Lyft’s financial prospects and potential stock performance. InvestingPro analysis suggests Lyft is currently undervalued, with additional insights available through the comprehensive Pro Research Report, which provides deep-dive analysis of 1,400+ top stocks, including detailed valuation metrics and expert commentary.

In other recent news, Lyft Inc. has been working on a simplified version of its app, called "Lyft Silver," aimed at elderly users. This development is part of Lyft’s strategy to differentiate itself from Uber Technologies Inc . (NYSE:UBER) by catering to underserved communities. In terms of financial performance, Lyft’s fourth-quarter adjusted EBITDA exceeded expectations, reaching $112.8 million, surpassing the anticipated $104 million. However, Lyft’s guidance for Gross Bookings growth in the first quarter of 2025 is expected to be between 10%-14%, which falls short of analysts’ projections.

Analysts have been adjusting their outlooks on Lyft following these developments. Bernstein, RBC Capital Markets, DA Davidson, and BMO Capital Markets have all lowered their price targets for Lyft, with the new targets ranging from $15 to $21. Despite these adjustments, RBC Capital Markets maintains an Outperform rating, citing Lyft’s potential for long-term growth. BMO Capital Markets and DA Davidson continue to hold a Market Perform and Neutral rating, respectively, reflecting a cautious stance on Lyft’s near-term prospects.

Lyft’s recent termination of its partnership with Delta Airlines (NYSE:DAL) is also seen as a minor obstacle to its revenue growth. Additionally, the competitive pricing pressures from Uber are impacting Lyft’s outlook for first-quarter bookings. On a positive note, Lyft’s investment in autonomous vehicle technology is showing promise, with AVs becoming increasingly supplemental to the rideshare market.

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