Is Uber Eating Lyft's Lunch? Here's What UBS Says About The Head-On Collision In Rideshare

UBS analysts see limited upside in shares of Lyft Inc LYFT as the company faces structural headwinds relative to its competition. 

What Happened: UBS analyst Lloyd Walmsley downgraded Lyft from Buy to Neutral and slashed the price target $50 to $16, which sent shares tumbling Monday morning. 

"We see Lyft benefitting from a continued recovery coming out of COVID in the near term but we are on the sidelines for the stock as we think that the company's LT growth algo is structurally lower in the core ridesharing business than the Street is modeling," Walmsley said in a note. 

UBS expects Lyft to grow its revenue 18% per year over the next two years, which is below average estimates for 20% growth. On the other hand, UBS expects Uber Technologies Inc UBER to grow around 21% each year.

Uber is scaling into newer markets and aims to transition taxi drivers to the Uber platform, the analyst said. Uber also offers better benefits for drivers, which should lead to share gains over time, he said. 

"Given lack of these growth drivers, we think Lyft will under-grow the market." 

Related Link: This Analyst Slashes PT On Lyft By 68%, Plus Telsey Advisory Group Predicts $125 For Nike

What UBS Found: UBS has collected data suggesting that usage of Lyft's Driver app has leveled off compared to Uber. Additionally, Lyft faces more rideshare insurance costs with its U.S. focus, which could impact the company's outlook as renewals hit.

UBS said it expects Lyft's fourth-quarter guidance to come in below consensus estimates.

"Speaking to the UBS Insurance team, we understand rideshare insurance could see 5-10% annual inflation (per ride) and this could be worse given Lyft's loss experience," Walmsley said. 

The analyst warned the company may require more reinvestment to maintain an attractive top-line growth profile. UBS said it would  become more positive on Lyft if there was increased visibility into the company's long-term growth strategy or if real time data showed the company was materially picking up share.

LYFT Price Action: Lyft has a 52-week high of $46.64 and a 52-week low of $11.96.

The stock was down 2.43% at $13.65 Monday afternoon, according to Benzinga Pro.

Photo: courtesy of Lyft.