On Tuesday, Loop Capital adjusted their outlook on Lyft (NASDAQ:LYFT), reducing the price target to $16 from the previous $20 while retaining a Buy rating on the shares. The adjustment reflects a new valuation based on a 12X multiple of the company's adjusted EBITDA for the year 2025. This change comes after Lyft's third-quarter gross bookings guidance fell short of the management's multi-year targets, which were only recently set, leading to a decline in investor confidence.
The firm's analyst noted the reduction in the price target was influenced by the recent disappointment in Lyft's financial outlook. Despite this, the analyst believes that Lyft's earnings growth could justify a higher valuation. However, the target multiple was decreased from 15X to 12X, which is approximately half of Uber (NYSE:UBER)'s multiple for 2024 and a 40% discount to the target multiple for Uber's stock.
The report highlighted that while there seems to be no immediate catalyst that could improve market sentiment for Lyft, the company is expected to maintain its position as a strong contender in the growing mobility services market. The analyst's stance remains positive on Lyft's long-term prospects despite the recent setback in guidance and the subsequent lowering of the price target.
In summary, Loop Capital has revised its price target for Lyft to $16 from $20, based on a lower valuation multiple, in light of the company's third-quarter guidance that did not meet expectations. Nonetheless, the firm maintains a Buy rating on Lyft, citing the company's potential in the expanding market for mobility services.
In other recent news, Lyft, in partnership with Payfare, has launched new features for the Lyft Direct debit card and banking app to enhance financial wellness for drivers. This includes Lyft Direct Savings, Balance Protection, an enhanced cashback rewards program, and additional wellness perks.
Meanwhile, analysts have made several adjustments to Lyft's stock rating. Nomura/Instinet upgraded the company's stock from Reduce to Neutral, citing improved cash flow due to cost reductions and operational changes. TD Cowen maintained its Hold rating on Lyft, while Roth/MKM and DA Davidson lowered their price targets for the company.
Lyft's second quarter results revealed positive trends, including a revenue increase, achievement of its first-ever GAAP profitability with a net income of $5 million, and record quarterly active riders reaching 23.7 million. The company's Media division also saw a significant revenue boost, increasing by over 70% from the previous year.
InvestingPro Insights
As Lyft navigates through its financial journey, recent data from InvestingPro provides a nuanced perspective on the company's performance and prospects. With a market capitalization of approximately $4.79 billion, Lyft's valuation reflects the challenges and opportunities ahead. Notably, the company's revenue has grown by nearly 19.88% over the last twelve months as of Q2 2024, indicating a solid demand for its mobility services despite competitive pressures.
One of the key InvestingPro Tips for Lyft is the expectation of net income growth this year, which aligns with the analyst's belief in Lyft's earnings potential. Additionally, the company's sales growth is anticipated to continue in the current year, which may help offset some concerns over recent price volatility and the significant stock price decline over the past six months. It's worth noting that Lyft holds more cash than debt on its balance sheet, which provides a degree of financial flexibility in uncertain times.
However, Lyft has faced challenges, including 11 analysts revising their earnings downwards for the upcoming period, and the fact that the company has not been profitable over the last twelve months. Moreover, the company's short-term obligations exceed its liquid assets, which could pose liquidity risks. For investors seeking more in-depth analysis, there are additional InvestingPro Tips available at https://www.investing.com/pro/LYFT, offering further insights into Lyft's financial health and market position.
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