On Wednesday, MoffettNathanson adjusted its stance on shares of Lyft (NASDAQ:LYFT), moving from a Sell to a Neutral rating. The firm also increased its price target for the ride-hailing company to $13.00, up from the previous $7.00.
"To be clear, we are by no means Lyft bulls," said the analyst.
Lyft has been grappling with several issues that impact its business model. According to the firm, the company is dealing with structural insurance cost headwinds and lacks pricing power and take-rates autonomy due to its competition with Uber (NYSE:UBER). Additionally, Lyft is projected to remain unprofitable on a GAAP Operating Income (OI) basis for the fiscal years 2024 and 2025.
The firm's analyst pointed out that Lyft's valuation appears expensive when compared with its peers, especially after considering stock-based compensation (SBC). Despite these concerns, the firm finds it increasingly difficult to maintain a Sell rating. The analyst stated, "It is simply too challenging for us to remain Sell rated with estimates that are now undifferentiated. Time to get off the ride."
InvestingPro Insights
Amid the recent changes in analyst ratings for Lyft, investors seeking a deeper understanding of the company's financial health can look to the latest metrics provided by InvestingPro. The adjusted market capitalization of Lyft stands at $6.14 billion, indicating the size and scale of the company within the ride-hailing industry. Despite challenges, Lyft's net income is anticipated to grow this year, which may offer a glimmer of hope for profitability in the near term.
Lyft's valuation, as reflected in the Price / Book ratio, is currently at 8.8, suggesting a premium compared to the book value of its assets. This aligns with the analyst's view on Lyft's expensive valuation, especially when considering non-cash expenses like stock-based compensation. However, it's worth noting that the company has experienced a strong return over the last three months, with a 15.41% price total return, potentially indicating investor optimism about future prospects.
Investors should also be aware of the liquidity concerns, as Lyft's short-term obligations exceed its liquid assets. This might necessitate careful financial planning and management to ensure the company can meet its immediate financial commitments. For those interested in exploring further, there are additional InvestingPro Tips available for Lyft, which can be accessed at Investing.com/pro/LYFT. With the provided coupon code PRONEWS24, users can get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking even more insights into Lyft's financial performance and future outlook.
Lastly, Lyft's recent price action has seen a decline, with the stock trading at $12.13, below the analyst's new target of $13.00 but above the previous target of $7.00. Whether this presents a buying opportunity or a sign of caution will depend on one's investment thesis and the additional 8 InvestingPro Tips that can help inform such a decision.
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