Wedbush Upgrades Lyft, Impressed With Ridership And Improved Profitability

Lyft Inc. LYFT is driving toward profits, and Wedbush thinks investors should hop in the car for the ride.

Wedbush upgraded Lyft on the back of a stronger-than-expected quarter for the ridesharing company, citing stronger revenue numbers and hints that the peak loss year is in the rearview mirror.

The Analyst

Wedbush analyst Daniel Ives upgraded Lyft from Neutral to Outperform and raised the price target from $67 to $75.

The Thesis

Lyft showed in the second quarter what Wedbush had been looking for, including better rideserhip, higher revenue per rider and, importantly, profitability, which will translate into Street credibility.

Ives was most impressed Lyft was able to drive strong rider and revenue per rider growth, while cutting back on promotions and discounts. Not only did Lyft offer fewer discounts, it actually raised prices in late June in some cities and routes, boosting revenue per rider numbers. Less discounting also led to significant cost saving in sales and marketing, he said.

“While not all questions are answered yet, we think there is enough evidence in the field that is positioning Lyft to be in a stronger than expected domestic position to gain share and monetize this opportunity with an improved expense trajectory sooner than expected,” Ives wrote in a note.

Ives said it looks to be that 2018 will now be the peak loss year for Lyft, with the company seeing year-over-year improvement in EBITDA losses, a year earlier than expected.

Price Action

Shares of Lyft were up 4.23% Thursday morning to $62.84.

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