Morgan Stanley Is Bullish On Ride-Shares, But Prefers Uber Over Lyft Right Now

LYFT Inc LYFT remains well below its March IPO price. Now trading down 45.7%, one analyst is comfortable to make a ruling.

The Rating

Morgan Stanley analyst Brian Nowak initiated coverage on Lyft with an Equal-Weight rating and $50 price target.

The Thesis

Morgan Stanley is bullish on ride-shares but recommends playing the industry through Uber Technologies Inc UBER. Uber boasts a first-mover advantage, the largest total addressable market, improving economics, global scale and diffuse regulatory risk, twice the user frequency of Lyft, and alternative revenue drivers like Uber Eats.

For these and other reasons, Nowak expects Uber to trade at a higher multiple than Lyft.

Still, Lyft has its advantages. The analyst expects five-year compound annual growth of 11% for ridership and 26% for revenue. He also expects $1.5 billion in earnings before interest, tax, depreciation and amortization in 2025 — a rate representing significant turnaround from this year’s anticipated $1 billion loss.

“We see scale, expense improvements around insurance and payments, and the more rational competitive environment (less advertising) driving Lyft to profitability,” Nowak wrote in a note.

This being said, Morgan Stanley considers Lyft’s prospects baked into the current stock price. Nowak awaits faster adoption, faster growth and corporate penetration before becoming more bullish. Changes in regulation, the duopoly market structure or price elasticity could keep the analyst on the sideline long term.

Price Action

At time of publication, Lyft shares traded down 1.2% at $42.53.

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Photo courtesy of Lyft.