Lyft's Recovery Hinges On West Coast Revival: This Analyst Sets $15 Target Amid Market Share Loss To Uber

BMO Capital Markets analyst Brian Pitz initiated coverage on the shares of LYFT Inc LYFT with a Market Perform rating and a price target of $15.

Insurance cost inflation uncertainty could weigh on near- and longer-term margin unlock as well as overall sentiment, says the analyst.

Lyft lost market share to Uber Technologies Inc UBER in 2022, given slower West Coast recovery and inflationary pressures on insurance costs (COGS) weighed on both revenue and adjusted EBITDA, notes the analyst.

So, users who have churned to Uber could be less willing to choose Lyft given lack of cross-sell capabilities, says the analyst.

Under new management, Lyft decided to lower prices to align more with industry trends, which has resulted in accelerated volume growth.

The analyst notes that Lyft over-indexes to West Coast markets, which continue to recover to pre-pandemic levels, offering upside to estimates as churned riders return.

Also, there is a secular tailwind for domestic rideshare companies given penetration is low across the industry in the U.S., writes the analyst.

Also See: Wedbush's Dan Ives Says He Would 'Avoid' Lyft In 2024: 'You Own Uber. You Put A Red Light In Front Of Lyft'

Analyst Brian Pitz also initiated coverage on Uber stock with an Outperform rating and a price target of $69.

Uber is entering 2024 in a position of strength with a quarterly sequential acceleration of Trips, Mobility and Delivery FXN gross bookings growth of 25%, 31% and 16%, respectively, says the analyst.

The company has proven its ability to innovate new verticals (grocery, alcohol, pharmaceuticals) into its business with the total segment increasing to $6 billion annual run rate exiting 3Q compared to $5 billion in 2Q23, notes the analyst.

While shares of Uber increased about 149% in 2023, the analyst believes there is upside potential over the next 12 months, given it is the categorical leader in both Rideshare and Food Delivery globally, with cross-selling opportunities still on the table.

AI integration across the tech stack has potential for higher productivity between drivers, better consumer matching capabilities across Mobility, Delivery, and Freight and increasing ad contributions given content recommendation improvement, says the analyst.

The analyst warned that geopolitical uncertainty is a headwind for Uber, given pauses in consumer demand for Mobility or lack of supply in the Delivery business.

Price Action: UBER shares are trading higher by 2.44% at $60.45, and LYFT is up 0.30% at $13.59 on the last check Tuesday.

Photo via Uber