Investing.com -- Benchmark analysts raised Lyft (NASDAQ:LYFT) from Hold to Buy in a note Monday, citing "significant optionality" despite potential headline risks from competitors like Tesla (NASDAQ:TSLA) and Waymo.
The firm has set a price target of $20 per share for the stock, pointing to several strategic factors expected to drive growth.
Benchmark highlights Lyft's decision to reduce surge pricing while expanding its Price Lock platform, which they believe will enhance rider metrics.
"We think Lyft is just getting started with their expansion via partnerships," Benchmark notes, emphasizing both traditional and autonomous vehicle (AV) fronts. These partnerships are seen as likely contributors to near-term upside in metrics.
Lyft's domestic focus and smaller market share are viewed as advantages.
"They both have less at risk in North America and everything to play for globally," Benchmark states, contrasting Lyft's position with Uber (NYSE:UBER)'s larger exposure outside North America.
Lyft's Flexdrive platform is also seen as a key asset, positioning the company to participate in the evolving AV market despite uncertainties around the economic model.
Financially, Benchmark points to Lyft's free cash flow (FCF) and forthcoming GAAP EPS inflection as potential catalysts for attracting new shareholders. They expect Lyft's shift from debt reduction to capital returns to be a significant turning point.
"Notice that we are not even including recent takeout rumors as a potential catalyst," Benchmark adds, suggesting these could help stabilize valuation in the long term.
The analysts believe a modest upside to consensus could significantly impact shares, referencing solid third-quarter results that led to a surge in stock price. They anticipate fourth-quarter performance could provide further evidence of Lyft's momentum, especially during peak holiday hours