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Shares of LYFT (NASDAQ:LYFT) are down almost 4% in pre-open Monday after a UBS analyst cut the rating to Neutral from Buy.
The price target is slashed by almost 70% to $16 to reflect lowered, below-consensus, estimates. For instance, Street projects 2024 EBITDA at $868 million while UBS’ new projections call for $671 million. Lyft projects $1 billion in 2024 adjusted EBITDA.
The core factor behind the downgrade call is skepticism that Lyft can deliver industry-level top-line growth. The UBS Evidence Lab driver survey showed that drivers prefer Uber (NYSE:UBER), which also has more app downloads and usage among drivers and consumers. Moreover, Lyft doesn’t appear to be the drivers’ main app.
“Uber’s rideshare growth, moreover, includes contribution from scaling newer markets (e.g. S Korea, Germany, Spain) and a strategy to “get every taxi on Uber by 2025”, neither of which are areas where Lyft plays. Finally, we think Uber’s platform benefits for drivers and riders likely lead to share gains over time. Given lack of these growth drivers, we think Lyft will under-grow the market. We also think 4Q guidance will be below consensus ests,” the analyst explained in a note.
The analyst projects Lyft’s compound revenue at 18% from ’22-’24, below the consensus of 20% and below the 21% estimate for Uber. In the near term, UBS also sits below the consensus of Q4 revenue and contributing margins.
“Lyft’s US centric business exposes it more to rising rideshare insurance costs which hit the 3Q contribution margin outlook and likely see further pressure ahead as third party insurance contracts renew October 1. Finally, we see risk that Lyft requires more reinvestment to maintain an attractive top line growth profile,” the analyst concluded.
