On Friday, BofA Securities analyst Michael McGovern raised the rating on shares of Lyft (NASDAQ:LYFT) from Underperform to Buy and increased the price target to $20.00 from $15.00. The upgrade follows Lyft's first-ever Investor Day, where the company outlined its financial targets through 2027.
Lyft's projections include 2027 estimated bookings of $25 billion, which surpasses the previous Street consensus of $22.5 billion. Additionally, Lyft anticipates achieving $1 billion in EBITDA, roughly $250 million above the prior Street estimate of $753 million, and $900 million in free cash flow (FCF), nearly $300 million more than the earlier estimate of $614 million.
The management team at Lyft has set forth an operational efficiency plan, aiming for a 10% reduction annually. This is expected to result in decreased incentives and sales and marketing expenses, contributing to an incremental operating expense leverage of 50 basis points each year. Furthermore, Lyft's management is projecting the company to reach GAAP profitability in the "earlier part" of its 2025-2027 planning horizon, indicating a sooner-than-anticipated achievement of this key financial milestone.
Lyft's forward-looking statements have provided a clear financial roadmap for the company's future, including significant improvements in both EBITDA and free cash flow. The revised targets suggest a more robust financial position for Lyft over the next few years, with the potential for operational efficiencies to drive further growth.
The upgraded rating and price target reflect the analyst's confidence in Lyft's strategic initiatives and long-term financial goals. The company's detailed plans for operational improvements and profitability have resonated positively with BofA Securities, resulting in a more optimistic outlook for the ride-sharing company's stock performance.
In other recent news, Lyft has made significant strides in its financial performance and growth strategies. The ride-hailing company's Q1 2024 revenue of $1.28 billion and adjusted EBITDA of $59 million exceeded expectations. Lyft has set ambitious financial targets, including a 15% annual increase in gross bookings through 2027, and plans to expand its margins to around 4% of gross bookings.
Analysts from firms such as Evercore ISI, Loop Capital, Canaccord Genuity, and Deutsche Bank have commented on these developments, with varied ratings and price targets. For instance, KeyBanc maintained a Sector Weight rating, implying a neutral outlook on the stock, while Loop Capital upgraded Lyft shares to a Buy with a $20 target.
BMO Capital Markets also raised its price target for Lyft to $19, citing improvements in rider frequency, while Canaccord Genuity upheld its Buy rating with a steady price target of $23. These recent developments represent promising strides towards Lyft's long-term financial goals.
Lyft is also focusing on advertising as a revenue stream and its efforts to improve free cash flow per share. The company's strategies for achieving these targets include product innovation, growth through partnerships, operational excellence, and the expansion of Lyft Media.
Despite the positive outlook, some firms such as Evercore ISI have chosen to keep their current estimates unchanged, preferring to wait for Lyft's fundamental results before making any adjustments to their projections. These developments indicate a promising future for Lyft as it continues to strive for growth and profitability in the competitive ride-sharing industry.
InvestingPro Insights
In light of the recent upgrade by BofA Securities, the latest data from InvestingPro provides additional context that may be of interest to investors considering Lyft's prospects. Lyft holds a market capitalization of approximately $6.67 billion, reflecting its position in the market. Notably, the company has demonstrated a revenue growth of 10.9% over the last twelve months as of Q1 2024, with a significant quarterly revenue growth of 27.65% in Q1 2024, underscoring the strong sales momentum highlighted during Lyft's Investor Day.
InvestingPro Tips reveal that Lyft holds more cash than debt, which is a healthy sign for its balance sheet. Additionally, analysts expect net income to grow this year, with 12 analysts having revised their earnings upwards for the upcoming period. These insights align with Lyft's own projections of increased bookings and EBITDA by 2027, reinforcing the notion of an improving financial trajectory.
For investors seeking a deeper dive into Lyft's performance and potential, there are 11 additional InvestingPro Tips available at: https://www.investing.com/pro/LYFT. Moreover, for those interested in an InvestingPro subscription, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking further valuable investment insights.
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