Lyft and Uber Receive Upgrades

Ride-sharing services, Lyft Inc. (Ticker Symbol: LYFT) and Uber Technologies Inc. (Ticker Symbol: UBER) were on the receiving end of an upgrade today from HSBC Bank. The bank upgraded both of the companies from a “hold” rating to a “buy” rating, stating that it thinks both companies have the potential to trade over 30% higher. HSBC also slightly lowered its price targets on both companies, lowering Uber’s price target to $44.00 from $49.00 and Lyft’s price target to $62.00 from $67.00. The bank believes that the regulatory concerns that were hovering over the space are now priced in and investor sentiment has turned negative, which the bank views as positive for the stocks.   

The upgrade comes on the heels of a strong quarterly earnings report for Lyft that the company released last month. Lyft reported an earnings beat of .68 cents per share vs. Wall Street analysts’ expectations of a loss of $1.74 per share. Additionally, the company reported a revenue beat of $867 million vs. $809 million that Wall Street analysts’ were looking for. Lyft also raised its revenue guidance for the year and now expects revenue to reach between $3.47 billion and $3.5 billion, up from its previous range of $3.275 billion to $3.3 billion.  

Above is the chart of Lyft’s stock since its initial public offering on March 29th, 2019. On its first day of trading, the stock opened at $87.24, had a very brief rally up to $88.60, then began to sell-off. Lyft gapped down on its second day of trading, which began a negative trading tone for its first trading weeks. The stock found a temporary bottom just under the $50.00 level and began to find some footing. Lyft rallied over 40% from its lows, which was shortlived after its second earnings release sent the stock down through its uptrend from the previous three months. The stock proceeded to move lower trading to an all-time low of $43.41 on September 10th. Lyft has since come off its lows and is trading 80% away from its initial opening price of $87.24.  

(Chart above courtesy of ​www.tipranks.com​)  

Based on a survey of 23 analysts offering 12-month price targets, the average price target for Lyft’s stock is $76.10. According to that number, the stock is priced at a discount relative to Wall Street’s analysts and could be considered undervalued around current levels near $48.01.

(Chart above courtesy of ​www.tipranks.com​)  

Based on a survey of 23 analysts offering 12-month price targets, the average price target for Uber’s stock is $53.43. According to that number, the stock is priced at a discount relative to Wall Street’s analysts and could be considered undervalued around current levels near $34.57.

Institutional investors usually wait for multiple quarterly reports to be released before investing in new businesses. This is primarily done so the newly traded company can prove to investors and the public that it can make money and become profitable over a period of time.

Investors in the ride-sharing space should look to Lyft’s next earnings release on November 6th for fresh news within the sector.   

 


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