'Profitability In Sight': Why These Analysts Are Bullish On Lyft

Lyft Inc LYFT announced fourth-quarter earnings after close Tuesday and analysts shared their takeaways on the report and what could be next.

The Lyft Analysts: DA Davidson analyst Tom White maintains a Buy rating and raises the price target on Lyft to $66.

Morgan Stanley analyst Brian Nowak maintains an Equal-Weight rating and raises the price target from $55 to $60.

Raymond James analyst Aaron Kessler has a Market Perform on Lyft.

Wedbush's Daniel Ives maintains an Outperform rating and raises the price target from $53 to $72.

KeyBanc analyst Edward Yruma maintains an Overweight rating and raises the price target from $57 to $72.

On Earnings: Kessler said Lyft is showing a gradual ride recovery and optimism could be building for a stronger recovery by the second quarter of the next fiscal year, while Yruma said Lyft is driving toward a recovery and could be a strong reopening play.

“We are in the early innings of an upward earnings revision cycle,” Yruma wrote in a note. The analyst pointed to mobility seeing improvement in the fourth quarter.

Revenue per active rider was up 14% quarter-over-quarter with a favorable shift toward high frequency riders, Ives said.

“Lyft expects an inflection in demand in 2Q and is preparing by increasing driver supply in 1Q,” Ives added.

Related Link: Lyft Co-Founder Discusses Last Mile Delivery, Taking On Uber Eats

Profitability In Sight: Lyft is guiding to hit profitability in the fourth quarter of fiscal 2021. Several analysts think Lyft is on pace to reach profitability before then.

Lyft’s path to profitability is “leaps and bounds ahead” of where it was last year, Ives said. When the environment improves for ride-sharing companies, Ives noted the impact to profitability will be outsized.

Nowak noted, “Lyft’s potential path toward 3Q profitability speaks to the cost cuts the company has made to emerge from the downturn more profitable."

Strong cost discipline showed in Lyft’s fourth-quarter results, Kessler noted: "We have increased confidence in Lyft’s ability to achieve positive EBITDA by 4Q21 and possibly by 3Q.”

Ives said Lyft showed discipline in its business model with how it handled expenses, and decreased driver acquisition and engagement spend.

“Lyft has removed $360M in fixed costs from the operating model and expects to further reduce costs by $35M in 1Q21,” Ives added.

LYFT Price Action: Shares of Lyft were up 5% to $56.21 on Wednesday.

(Photo: Lyft)